Nifty witnessed some minor pullback with rollover moves, but the last week's lows of 12,730 acted as a strong support to aid a sharp recovery in the second half of the session. The index closed near 13,000 on November 26.
Nifty gained 11 percent while Bank Nifty outperformed, gaining nearly 23 percent for the November F&O series.
Among sectors, metals, realty, auto and energy indices gained 26.8 percent, 13.9 percent, 11.7 percent and 11.1 percent, respectively, While IT, pharma and FMCG gained 5 percent for the November series.
The December derivatives series is 5-week long and we expect volatility to increase if India VIX crosses 23 levels on the higher side.
Investors should reallocate their portfolios to defensive sectors and hedge their portfolios doing bear spread or long put butterfly strategies as we are trading at an all-time high with sharp outperformance over the last 2 months.
The Midcap index continues to be at an inflection point and it may outperform the broader indices.
Nifty Pharma index has closed in an inside range of the previous month's candle and we expect it to be a strong outperformer from the current levels, scaling its peak of 12,530 of September 2020.
Here are two buy and one sell calls for the next 2-3 weeks:
Lupin | Buy | LTP: Rs 899.60 | Target price: Rs 1,030 | Stop loss: Rs 825 | Upside: 14.5%
The stock has bounced from its long-term 200-day average after a sharp decline from the recent high of Rs 1,125.
RSI has moved higher from its lower range and will resume its uptrend with positive price action.
However, in case of a major decline, multi-month support of Rs 830-840 would act as strong support for the stock.
Sun Pharmaceutical Industries | Buy | LTP: Rs 512.75 | Target price: Rs 585 | Stop loss: Rs 475 | Upside: 14%
The stock is trading above its 200-week average and we expect a strong breakout from the current levels.
We believe it has completed its price and time-wise correction and it may outperform over the next few weeks.
Havells India | Sell | LTP: Rs 806.10 | Target price: Rs 730 | Stop loss: Rs 860 | Downside: 9%
The stock scaled a new all-time high last week, making lower tops over the past few days.
It has broken its short-term averages, indicating a reversal from the current levels.
Negative divergence in RSI from higher levels and higher low formation supports a negative stance.
(The author is Senior Research Analyst at Reliance Securities)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.