According to Shah, markets are likely to remain in consolidation mode for some more time.
Gautam Shah, associate director and technical analyst of JM Financial, spoke to CNBC-TV18 about market fundamentals and shared his outlook on Indian equities.
"From a medium-term perspective, the market continues to look very strong. It is just that near-term the indices seem to have got into recess mode and you cannot complain about it because let us understand that the Nifty had seen a 1,200 point rally from 10,600 to 11,800 in a matter of few weeks. Since it had happened so fast, without any major correction in between, at some point of time, the indices had to turn a little overbought and it did turn overbought around the 11,700-11,800 area and not only did it turn overbought but I think a lot of the weaker hands who did not get an opportunity to sell the market – the last September-October when we had got to 11,700-11,800 - I think that little bit of bout of profit booking led to this consolidation," said Shah.
According to Shah, markets are likely to remain in consolidation mode for some more time. "You could see more price and time correction. However, I do believe that somewhere in the 11,400-11,500 band, this pullback should end and possibly as we get closer and closer to the important event of next month, the market is only creating a platform to start the next leg up and when that next leg upstarts, it should take the Nifty towards our working target of 12,222. So nothing changes from a bigger picture perspective, it is just that short-term things are slightly overbought even at this juncture. Another 50-150 points downmove from here would not surprise me but that is only going to be a buying opportunity because around 11,400 mark, I think the risk reward would once again be strongly justified to go along," said Shah.
"Somewhere around 29,000 on the Bank Nifty would be justified to go fresh long once again and our bigger picture target for the banking index is about 32,500. So if you do get that index in this 29,000-29,500 band, I think that is a great risk-reward to play with for the next three-six months," said Shah.