Moneycontrol
Last Updated : Nov 04, 2018 11:37 AM IST | Source: Moneycontrol.com

Looking to tweak your investment strategy? Kotak Securities lists 5 steps

Shrikant Chouhan of Kotak Securities sees the Nifty heading higher to 10,850-10,900 levels if it surpasses 10,710 on November 5

Moneycontrol Contributor @moneycontrolcom

Shrikant Chouhan

Kotak Securities

For experienced investors and traders, I do not need to say what their trading strategy should be? In every bull market, a fresh group of investors and traders join the market and for them this is something unique, unknowing and shocking.

Last week, almost all indices gained close to 3-7 percent. The market witnessed maximum bullish activity in those companies that were seeing negative news flow or were in the Additional Surveillance Measure (ASM) list.

Primarily it is nothing, but a bear market rally. During the recent fall (from 11,760 to 10,005) all equations relating to the domestic economy suddenly turned volatile and entered a trending fall. Bonds, currency and even US equity markets turned negative for us.

Domestic news flow related to politics and NBFCs helped bears pull the market to 10,000 levels in just 8 weeks from 11,760 level, whereas it took the Nifty nearly 23 weeks to touch 11,760 level.

Events that are lined up are highly uncertain and markets don’t like uncertainties. We are of the view that by December 11, market outlook would be much clearer. Till then, we can expect volatile moves to happen again and again.

The currency and crude oil are trading at important levels (resistance for currency at 72.50 and support for Brent crude at $71 a barrel). They could reverse their prevailing trend, even on slightly negative developments, which is the reason why we view this as a bear market rally across all indices.

If you ask me what our strategy should be?

Firstly, I would suggest reducing weak long positions if the market moves higher from current levels

Second: Trade short if the market breaks previous lows

Third: Keep a close watch on how consumer durables and autos perform as they give the first indication if things are stabilising or not

Fourth: Keep a track of whether any defensive sectors like pharmaceuticals, technology or FMCG are moving towards their previous highs as they remain favourite bets among fund managers and investors and remain least affected in times of uncertainty.

And,

Fifth: One has to keep accumulating strong companies in deep panic or at specific supports.

The PSU bank index has performed better than anyone’s expectations. A similar trend was exhibited in the same month last year, but and later it failed to hold those gains.

Based on charts and correlations, the second best sector, which has done extremely well, is construction-related stocks.

The next buzzing sector would be infrastructure, capital goods and cement after the General Elections. Till then, we feel pharmaceuticals should do well.

If the Nifty surpasses 10,710 on November 5, the markets would have some more space to head higher to 10,850-10,900 levels.

Failing to cross 10,710, would be negative and could send the market back to 10,350 or 10,100 levels in the near term. Fresh buying is advisable in tranches at 10,350, 10,150 and at 9,900.

Disclaimer: The author is a Senior VP (Technical Research), Kotak Securities. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Nov 4, 2018 11:37 am
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