Speaking to ET Now, Dharmesh Shah from ICICI Direct noted, “Yes, absolutely, today has been a better day compared to yesterday, absolutely, the way the market seems to be doing right now. But it looks like market is still not yet convinced with this ceasefire news because the way the Singapore SGX opened today and we see some bit of a profit booking in the opening trade, it looks like market seems to be still not convinced with this ceasefire.”
Shah emphasized the importance of monitoring market sentiment in the near term. “If you look at the market breadth, that is important to be looked out for in this current scenario where the percentage of the stocks which are trading above the 50-day and 200-day moving average of total 500 are still now just at around 10% and 15%. So, only 15% of the stocks are still trading above 200-day exponential moving average which is clearly showing a lot of pessimism, oversold in territory also into oversold territory. So, it looks like whenever we have seen historically where the percentage of stocks trading above 200-day are coming towards the level of 15% to 10%, market has a tendency to form the intermediate durable bottoms.”
He expects the Nifty to find support in the 21,900–22,500 range. “We believe 21,900 will act as immediate strong support for the Nifty again at 200-week exponential moving average which has been working fine for last two decades. So, 21,900 will be a strong support for the Nifty. On the higher side we believe 23,300 will act as immediate resistance. A move above 23,300 will lead to fuel in the market in terms of rally towards 23,800.”
For investors looking to rebuild portfolios, Shah advises a staggered approach. “Overall, I would say that it is not a market of a trading, but yes, one who is looking at constructing the portfolio, this is a good time to look at constructing the portfolio in a staggered way because we believe whatever happens in this coming one or two weeks we should see some major bottoms formation in the coming few weeks.”
When asked about sectors and stocks that could benefit in the current environment, Shah highlighted banking, autos, capital goods, and metals. “Coming to first banking, the one sector has seen a good up from the top of 58,000 to almost from around, so almost 12% to 15% correction we have seen in banking. So again in banking we look for most of these PSUs banks as well as private banks are the ones that one should definitely look out for. The risk-reward looks more favourable at the current market price for most of these largecap banks like Axis Bank, you talk of even Kotak Bank I think so the one where we believe there is a lot of steam left off from the current market price.”
In the auto sector, he said, “Auto again I will look for the stocks like M&M, Maruti, Ashok Leyland are the ones one should definitely look out for. At the same time, I would look for the auto ancillary space like tyre stocks which have again taken a hit on the back of high crude oil prices are the ones where we see the risk-reward looks more favourable like stocks like Apollo Tyre, JK Tyre.”Capital goods and metals also offer opportunities. “Stocks like Thermax, Siemens, ABB are the ones one should definitely look out for. Even L&T I think so is the one where we see the risk-reward looks more favourable at the current market price. And last but not the least again I would say the metal space clearly outperforming in this current corrective phase where stock specific to go, we will look for the steel stocks where stocks like SAIL, Tata Steel are the ones one should definitely look out for.”
Shah concluded that while the market may be approaching a bottoming phase, investors should remain cautious. “Once we see some bit of a settlement or some bit of stability in the market in this range of 22,000 to 23,000, then one should take a further call on the higher side. Till then we believe the market likely to consolidate in this range of 21,900 to 23,000.”