Markets undergoing correction for past month, select heavyweights outperform; US markets to drive global cues

Markets undergoing correction for past month, select heavyweights outperform; US markets to drive global cues

By Ajit Mishra

Markets have been maintaining a corrective tone for over one and a half months now. However, buying in select heavyweights combined with noticeable outperformance of the broader indices is not only capping the pace of decline but also offering regular buying opportunities. Amid all, mixed signals from the global front are keeping the participants guessing over the next directional move. In short, we are seeing more time wise corrections in the benchmark index, after a phenomenal surge.

While the benchmark is not offering any clear signal over the next directional move, participants should stay focused on stock-specific opportunities based on the sectoral trend. Among the key indices, we suggest preferring auto, metal and IT for long trades while pharma and FMCG may continue to trade lackluster. Needless to say, the consistent outperformance of the midcap and smallcap is the highlight of the recent corrective phase but traders shouldn’t go overboard and stick only with the fundamentally sound counters, even for short term trading.

When it comes to the key indices, Nifty and Bank Nifty, traders should plan their positional trades as per the key levels. And, we feel they should prefer options strategies instead of outrights initially.

Nifty (CMP: 19,528.80)

Nifty has managed to hold 19,200 despite multiple attempts of breakdown in the last three weeks and that may help the bulls to reclaim the lost ground ahead. However, it would be early to say that the trend has reversed until we decisively cross and sustain 19,650 levels.

Bank Nifty (CMP: 44,578.30)

The banking index has also been witnessing volatile swings while hovering within 43600-45000 for the last 3 weeks. We feel the prevailing mixed trend among the private banking majors would result in further consolidation ahead. Meanwhile, traders should stay selective and prefer stocks that are showing relatively higher strength within the sector.

Stocks to Watch

Bullish – AB Capital, Bank Baroda, Coal India, HCL Tech, ONGC, UltraTech Cement

Bearish – Auro Pharma, Hindustan Unilever, Kotak Bank, Pidilite Industries

(Ajit Mishra, SVP- Technical Research, Religare Broking. Views expressed are the author’s own. Please consult your financial advisor before investing.)