Though we may see some consolidation or profit taking initially, we believe the prevailing up move to extend further. The Nifty50 has potential to retest its record high this month.
Bulls helped the S&P BSE Sensex to climb fresh record highs in October, but historical data suggests that the trend could change as bears have usually dominated the Street in November.
As we step into November, fears of topping out might haunt investors. Although there are no evident signs that the market has topped out but given the fact we are trading near crucial resistance levels, further consolidation cannot be ruled out.
The S&P BSE Sensex hit a record high of 40,392.22 on October 31 but lost momentum on Friday. Experts remain mixed as to how Sensex will close for November, but the probability of further consolidation cannot be ruled out as we head towards the holiday season.
The last 11 years of data suggest that the S&P BSE Sensex closed in the red in 7 out of 11 years for the month of November. The S&P BSE Sensex saw its worst fall in the year 2008 when the index fell by over 12 percent, followed by the year 2011 when it saw a decline of 7.7 percent, and in 2016, the index fell by over 4 percent.
The index rose in 4 out of the last 11 years. It rose nearly 10 percent in the year 2009, followed by 4 percent rally in the year 2012 and over 5 percent gain in 2018.
Various policy measures introduced by the government to support the economy, along with in-line results for the September quarter and stable global cues helped the S&P BSE Sensex to climb towards fresh record highs in October.
For long term investors, every dip could be used as a buying opportunity as the potential of further upside still remains intact.
“Nov’19 has started on a positive note and can be expected to close on a positive note just like Nov’18, led by good festive sales, lower tax rate giving a boost to corporate earnings and the bottoming out scenario in certain sectors,” Vinay Pandit – Head, Institutional Equities, IndiaNivesh told Moneycontrol.
“These kinds of data points are of little relevance to long-term investment strategies and can be easily ignored. Overall earnings performances of most companies have been good for Q2FY20 vs Q2FY19 when there were more misses than hits,” he said.
Pandit further added that analysts continue to be conservative on the back of weak expectations for the year, which is a good hidden opportunity to invest for the long-term in quality stocks at low valuations.
If you are a long term investors then it would be the best time to use dips to buy but if you are a trader with a short term time horizon then analysts’ advise hedging or risk aversion by avoiding excessive leverage while trading. But, the up move remains intact.
“Though we may see some consolidation or profit taking initially, we believe the prevailing up move to extend further. The Nifty50 has potential to retest its record high this month,” Ajit Mishra, VP Research, Religare Broking
“We feel Nifty may see some consolidation after the recent rally however the bias would remain on the positive side. Importantly, almost all the sectoral indices are contributing to the move and we feel banking and metal could outshine the others in the near future. Considering the overall trend, we suggest continuing with a “buy on dips” approach,” he said.
Umesh Mehta, Head of Research, Samco Securities is of the view that there is every reason to believe that statistical probability will continue even in November given that we had experienced a sharp run up and global markets to are at overbought levels. Therefore, a correction is natural this November.Disclaimer: The views and investment tips expressed by investment experts 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.