Nitin Raheja, CIO, Rada Advisors, says, barring yesterday, the Nifty has been showing remarkable strength. "It has been gradually inching up. Each correction has been pretty weak and unconvincing. It has been actually creating higher bottoms. We would probably break on the upside. In August, the whole trend has been mixed. That’s the reason you are seeing market going nowhere, trading in a zone between 4,400 and 4,700."
Sajiv Dhawan of JV Capital Services says
The markets are constantly giving investors a buying opportunity around 4,300-4,400. "However, it is not so easy to trade, because the natural temptation is for a lot of trend followers to start short selling as the markets fall. Investors are looking to buy on dips, they are sitting on funds. On the upside, you are seeing cap around 4,700. This is the level where aggressive short positions have been built up or some heavy profit taking comes up. We seem to be stuck in a few hundred-point range. Unless you see an increased surge in liquidity and a constant flow of positive news again from somewhere, the markets are likely to remain very volatile over the next few weeks."
Rohit Srivastava of Sharekhan says
We are in a cyclical market. "It is similar to the ‘90s, when we had five positive months, then six negative months. We had a good four-five months and probably the next four-five months would not be as good. We could either consolidate or could head down all the way to October-November. Apart from short-term rallies, the market would either stop making new highs or actually start making newer lower bottoms." He thinks there is still downside in the short-term for the Nifty, before it can actually think of trying to re-test 4,700.
Vijay Bhambwani of bsplindia.com says
The medium-term strength was never a doubt, it was just the short-term outlook which is a little cloudy here. "I would want the Nifty to stay above the 4630-4650 band, before I go out and start taking momentum longs. Till then, I might just take intraday punts on the long side. I would not like to carry my long positions home as yet."
Sector/Stock picks:
On metals:
Raheja advises investors to buy steel companies on corrections. "The steel sector is doing extremely well at this point of time. Q3-Q4 onwards, the kind of volume numbers that steel companies are talking about will also be supplemented by the low base impact of last Q3 and Q4 which really saw steel coming off."
Bhambwani is positive on industrial metals. "Steel has about 25-30% to go in the coming two quarters. I would give similar moves to these stock prices if not more, may be even 35-40% up to 50% in a year."
However, Srivastava advises investors to stay away from metals as the sector is affected by currency trends. "One of the key factors that everyone is looking at is the currency trend. There are so many people who have been bearish on the dollar that it has actually turned last week. Technically, it is looking bullish, which means the dollar will start rising from here. That is going to impact everything from commodities to equities. Assets classes around the world are on their way down. "
On midcap IT:
Dhawan says some of these stocks have gone way beyond our targets, but the momentum seems to be there. "There doesn’t seem to be any let up. On any fall, these stocks can be aggressively bought into. While valuations relative to some big companies might appear reasonable, especially in an overvalued market, the reality is that again momentum seekers and speculators are latching on to stocks where they feel that, at least on a relative basis, there is some value. The momentum is certainly there and until that breaks with a sharp correction of 10-20%, all declines in this sector at the moment will be bought into. One can play along with the momentum as long as it lasts." He advises investors to accumulate Rolta and Tata Elxis.
Bhambwani sees the upside potential of Rs 45 in Firstsource. Rolta, he says, can go up to about Rs 185 if it closes above Rs 68-69 levels for at least 2-3 trading sessions on a trot.
On the infrastructure space:
Dhawan advises investors to accumulate stocks like L&T, Siemens, Punj Lloyd from the infrastructure space. "A lot of the stocks are not cheap considering the market as a whole. Stocks like Punj Lloyd have become highly speculative. They have raised funds and are looking to restructure, so investors are probably looking to buy on dips. Stocks like BHEL and Larsen & Toubro have good order books and are seeing more interest from institutions rather than the average small investors. It is a sector as a whole, where a lot of interest is there, a lot of fund activity is there, lot of new launches of funds which are looking to specialize in that. Interest will definitely remain. On a valuation front and in an expensive market, you really need that liquidity, optimism, and positive sentiment to continue to make sure that these stocks in the sector can continue to maintain the premiums they are currently quoting in the markets."
s: MC
Sajiv Dhawan of JV Capital Services says
The markets are constantly giving investors a buying opportunity around 4,300-4,400. "However, it is not so easy to trade, because the natural temptation is for a lot of trend followers to start short selling as the markets fall. Investors are looking to buy on dips, they are sitting on funds. On the upside, you are seeing cap around 4,700. This is the level where aggressive short positions have been built up or some heavy profit taking comes up. We seem to be stuck in a few hundred-point range. Unless you see an increased surge in liquidity and a constant flow of positive news again from somewhere, the markets are likely to remain very volatile over the next few weeks."
Rohit Srivastava of Sharekhan says
We are in a cyclical market. "It is similar to the ‘90s, when we had five positive months, then six negative months. We had a good four-five months and probably the next four-five months would not be as good. We could either consolidate or could head down all the way to October-November. Apart from short-term rallies, the market would either stop making new highs or actually start making newer lower bottoms." He thinks there is still downside in the short-term for the Nifty, before it can actually think of trying to re-test 4,700.
Vijay Bhambwani of bsplindia.com says
The medium-term strength was never a doubt, it was just the short-term outlook which is a little cloudy here. "I would want the Nifty to stay above the 4630-4650 band, before I go out and start taking momentum longs. Till then, I might just take intraday punts on the long side. I would not like to carry my long positions home as yet."
Sector/Stock picks:
On metals:
Raheja advises investors to buy steel companies on corrections. "The steel sector is doing extremely well at this point of time. Q3-Q4 onwards, the kind of volume numbers that steel companies are talking about will also be supplemented by the low base impact of last Q3 and Q4 which really saw steel coming off."
Bhambwani is positive on industrial metals. "Steel has about 25-30% to go in the coming two quarters. I would give similar moves to these stock prices if not more, may be even 35-40% up to 50% in a year."
However, Srivastava advises investors to stay away from metals as the sector is affected by currency trends. "One of the key factors that everyone is looking at is the currency trend. There are so many people who have been bearish on the dollar that it has actually turned last week. Technically, it is looking bullish, which means the dollar will start rising from here. That is going to impact everything from commodities to equities. Assets classes around the world are on their way down. "
On midcap IT:
Dhawan says some of these stocks have gone way beyond our targets, but the momentum seems to be there. "There doesn’t seem to be any let up. On any fall, these stocks can be aggressively bought into. While valuations relative to some big companies might appear reasonable, especially in an overvalued market, the reality is that again momentum seekers and speculators are latching on to stocks where they feel that, at least on a relative basis, there is some value. The momentum is certainly there and until that breaks with a sharp correction of 10-20%, all declines in this sector at the moment will be bought into. One can play along with the momentum as long as it lasts." He advises investors to accumulate Rolta and Tata Elxis.
Bhambwani sees the upside potential of Rs 45 in Firstsource. Rolta, he says, can go up to about Rs 185 if it closes above Rs 68-69 levels for at least 2-3 trading sessions on a trot.
On the infrastructure space:
Dhawan advises investors to accumulate stocks like L&T, Siemens, Punj Lloyd from the infrastructure space. "A lot of the stocks are not cheap considering the market as a whole. Stocks like Punj Lloyd have become highly speculative. They have raised funds and are looking to restructure, so investors are probably looking to buy on dips. Stocks like BHEL and Larsen & Toubro have good order books and are seeing more interest from institutions rather than the average small investors. It is a sector as a whole, where a lot of interest is there, a lot of fund activity is there, lot of new launches of funds which are looking to specialize in that. Interest will definitely remain. On a valuation front and in an expensive market, you really need that liquidity, optimism, and positive sentiment to continue to make sure that these stocks in the sector can continue to maintain the premiums they are currently quoting in the markets."
s: MC
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