We would like to reiterate that valuations are quite stretched and investors would be wise to mitigate the risk of a correction by reducing allocation towards equities. Our view remains that the broad markets are ripe for a correction over the coming few weeks. We have advised investors to increase allocation towards Debt & Gold.
Nifty & Bank Nifty
Nifty will experience weakness if it breaks its support at 17250, until it does it could remain sideways or mildly bullish, having said that we feel it is unlikely that it will make fresh highs over the coming weeks.
We reaffirm a mildly bearish stance on Bank Nifty over the coming few weeks.
Although we continue to remain bullish on the FMCG sector, should the important support level of 39800 be breached on the downside, we could see some weakness coming into play over the short term. Investors could use this as an opportunity to accumulate this index either via ETFs or Mutual funds.
Surprisingly, since last week, the IT sector has turned around upwards sharply, reiterating the investor enthusiasm in this sector. We would however want our investors to be careful as valuations are very stretched and some correction is due, we hope to see some of it in the coming weeks.
Nifty Pharma & Auto
We continue to remain bearish on both the Pharma & Auto sectors and are waiting for some momentum to believe that bullish sentiment has returned.
We expect this index to retain a bullish sentiment in the coming week and are of the opinion that the current few weeks this sentiment shall remain.
Nifty current month future closed with a premium of 17 points to its spot. Next month's future is trading at a premium of around 50 points.
We saw open interest addition of nearly 5.87 percent in Nifty and considering the price action it clearly hints strong selling during the week.
Top 5 recommendations
EXIDEIND is in a range since last few weeks. Currently it is trading near the upper end of that range. Any sustainable move above 187 level will offer a good buying opportunity.
BHARTIARTL has taken support near its 30 day moving average. Any sustainable support over the moving average will bring a good buying opportunity.
HCLTECH is in the strong uptrend. After consolidation currently it has taken support near the 30 day moving average. A good buying opportunity could be available above 1340
TCS is consolidating within a channel for the past few weeks and has been flirting near its all time high level, A good lon opportunity could present itself if the stocks passes the 3,990 level.
Asian paints has taken support near its previous resistance and is a good point to go long from above 3,440.
(Gaurav Udani is Founder & CEO of Thincredblu Securities. He tweets @Udanii)