Good opportunity to add longs if Nifty50 falls towards 10,050-10,100: Rajeev Srivastava

Q. The week which started off on a strong note witnessed profit booking decline in the second half of the week. How would you describe the market action in the week gone by?

A. The week started on a strong note, scaled a new three-month high at 10,553, and witnessed a minor profit booking due to derivatives expiry rollover move and fresh concerns of the second wave of COVID-19 increasing worldwide.

Among sectors, FMCG and IT gained by 3.6 percent and 3.4 percent, respectively, while other sectors like Banks, Realty, and Auto shed some gains from the week’s high to close positive by 1.3 percent average for the week.

Q. The June series saw both Sensex and Nifty rally over 8 percent each. Which are the important levels that one should track in the July series? Do you think we could reclaim 10,500 or bulls will fail to defend 10,000?

A. The headline indices NIFTY50 and Sensex gained by 8 percent in the June series as it filled the gap levels at 9,550 in the middle of the month and witnessed a strong pullback over the past three weeks.

Bank Nifty and NBFCs led the upmove as interest moratorium ruling is now being postponed to a later date in August, followed by key sectors like Consumer, Energy and IT gained traction.

We continue to remain positive as the broader markets remained strong and any decline near to 10,050-10,100 levels would be a good opportunity to add longs and on the higher side, 10,900 levels will be important to watch, which is also the 200-Day Moving Average (DMA).

Q. Small and midcap stocks outperformed benchmarks in the June series, and so far in the month as well. What is driving the rally in the broader market when most of the macro indicators remain muted?

A. The Nifty Mid-cap and Small-cap indices gained by 12.8 percent and 17.6 percent, respectively, as the ratio of Nifty midcap to Nifty index touched the lowest level at 1.4 levels over five years and the sharp correction since the highs of January 2018 has completed his correction on a longer time frame.

Valuations remain attractive and steep discount to large-caps also supported a strong move after the headline indices up move from lower levels in April and May 2020.

Re-classification of stocks of mid-cap and small-cap for the mutual funds also led to some positive momentum and results commentary was better than expected for the large midcap companies.

Q. More than 70 percent of the stocks in BSE500 gave negative returns in the last six months. As any as 18 out of 376 stocks fell more than 50 percent that include names like IndusInd Bank, Future Retail, Repco Home, Lemon Tree and Raymond. Are they opportunities in a bear market or one should avoid catching the falling knife?

A. The markets peaked at the start of the year in January and we witnessed a vertical fall from the highs so we are witnessing a lot of stocks that gave negative returns. But if one looks at the broader picture, these stocks have witnessed sharp up move also from their respective lows in March.

We believe one should follow a sectoral approach and then drill down to individual stock wise research for better understanding.

From the above-mentioned names stocks like IndusInd Bank, Repco Home looks good and one should buy in declines as they survived the mayhem, and once the economic recovery starts it would deliver strong earnings growth and returns over the coming years.

Q. What is your take on markets in the first six months? Opportunities for new investors, but pain for those who are already invested? And, what should be the strategy now to tackle the second half?

A. The first half has been a roller coaster ride for the investors as we witnessed a new high at 12,430 in January 2020, and post that we witnessed a sharp correction due to higher valuations, global sell-off and COVID-19 pandemic hitting worldwide for deeper cuts to make a bottom near 7,511 levels in March 20.

We continue to believe that the bottom is in place as normalcy in economic activity is expected to return by the end of this next quarter.

It might take a little longer for actual economic activity to return, but usually, markets react in advance and we witnessed a strong move to recover 50 percent of the fall in the last quarter.

We as individual investors should look for investment at regular periods of time. A certain part of cash should always be kept in the portfolio for crisis or unforeseen times of an individual.

The broader markets and indices have moved up in a range of 35-40 percent from bottoms in a very short span so there could be some profit booking or pullbacks in overall markets with respect to the first-quarter earnings season starting in the middle of July 20.

This could be a good opportunity to invest in equities as an asset class for better returns over a longer time frame of more than three years as other assets could be less risky but rewards are also very meagre to beat the consumer inflation.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.