A day after suffering strong losses of about 1.5 percent, equity benchmarks the Sensex and the Nifty remained in the lower territory in the morning trade on November 26, an indication that investors wanted to take the money off the table as uncertainty around COVID-19 remains an overhang.
The market did make some attempts to bounce back but failed. The last day of the November F&O series is expected to see volatility.
At 1010 hours, the Sensex was 88 points, or 0.20 percent, down at 43,739 and the Nifty was trading 43 points, or 0.33 percent, lower at 12,815.75.
While the long-term view remains positive, experts foresee an extended profit-booking as the market is trading near record highs.
"The overall structure of the market remains positive given the optimism over vaccine progress and Joe Biden transition as the US president. However, intermittent profit-booking cannot be ruled out, given the sharp rally in the near-term," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
Investors should also watch out for developments over stimulus announcement in the US. On the domestic side, the market would look for cues from the monthly F&O expiry and the rollover data, especially on the FII position.
"The Nifty has to hold above 12,850 to witness a bounce towards 13,000-13,050, while a hold below the same could see weakness towards 12,750," Khemka added.
In the previous session, the Nifty formed a bearish engulfing pattern. In the last couple of sessions, the formation of bearish engulfing patterns failed to show follow-through weakness in the market and the index bounced back from the lows. Hence, follow-through market action is necessary in the short term.
Nagaraj Shetti, Technical Research Analyst, HDFC Securities, is of the view that the sharp weakness of November 25 raised chances of a trend reversal at the all-time high of 13,145 levels.
"A sharp follow-through weakness is going to be crucial to confirm short-term top formation in the market. The Nifty sustaining at the immediate support at 12,800 levels in the next one-two sessions could open chances of upside bounce in the market and also more upside in the near term," Shetti said.
Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments, said the support of 12,800 has still not been violated and traders can continue to hold their positions with a trailing stop loss.
"If we break 12,800, we could drop further to 12,500. If we resume the existing uptrend from the current level, we can head to 13,200," said Hathiramani.
How to trade?
Experts advise being prudent and stock-specific in such markets.
Since there is a long bull market ahead, there may be corrections to keep the valuations healthy but these corrections should be bought in, they said.
The September quarter earnings turned out to be better-than-expected. Now, the December quarter numbers would be on the radar, as they will clear the picture on how much COVID-19 dented the banking sector.
The key is to find pockets of opportunities. In the last few days, banking stocks were trading higher which pushed the market to record levels but the sector is not out of the woods yet.
Arvind Sanger, Managing Partner, Geosphere Capital Management, told CNBC-TV18 that the next bull market won't be driven by banks as laggards like real estate, travel and entertainment players are likely to participate hereon.
"I wouldn't put all my bets on the banking sector. Axis Bank, ICICI could see some rotation. I expect healthcare, health institutions and diagnostics to remain a long-term theme. The spending on healthcare that comes out of COVID will be permanently at a higher level and will see a higher growth trajectory," Sanger said.
Gautam Shah, Founder & Chief Strategist, Goldilocks Premium Research, is of the view that after hitting 13,100, the market is slightly overbought, so one has to be a little careful in making fresh commitments from a shorter-term perspective.
"If at all 13,200 were to get crossed, you could see some more near-term strength. Going forward, the next four weeks, six weeks, 12 weeks are going to be about stocks and a lot of underperformers are now making a comeback," Shah told CNBC-TV18.
Instead of looking at the headline indices, the bigger opportunity will be in the midcaps, smallcaps and underperformers like realty and chemicals and they are the ones that will give "super normal" returns.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.