It was a day of positive consolidation after yesterday’s breakout rally. Participation from the front line indices continued. The Nifty breached 5,600 gaining 27 points by the close of trade. The Sensex shut shop at 18,645 up 85 points. It was not so great for the Midcaps which ended the day flat.
Rahul Mohindar of viratechindia.com says that we are going to see some intra day pause which could get as deep at to about 5520-5540. “Obviously it is going to be very tight and difficult to spot whether it is going to start from 5520 or 5540 but I think we are safely in a region where one could expect a sudden bump down,” he adds.
However Sudip Bandyopadhyay, MD and CEO, Convexity Solutions is a bit nervous as the market has run up is bit to fast. Bandyopadhyay reasons that the economic news which is emanating from Europe is not too good. So there will be some correction in the Indian markets also.
“There will definitely be profit booking and correction basically what’s happening is the rally is being driven by liquidity and nothing else, the fundamentals haven’t changed. There hasn’t been any earth shattering good news as far as Indian markets are concerned so the liquidity is what is driving, at the moment foreign institutional investors get a bit nervous or bit cautious we will see a break in this rally,” Bandyopadhyay adds.
Bandyopadhyay does not see any dramatic correction. He thinks that the bottom of the index probably will not go below 5400 levels. On the upside we don’t see it moving above 5650 levels.
“Correction or the upward movement both will be limited and I think that’s the reality if we see the index movement over the last 12 to 18 months. The index has not been going anywhere neither breaking out nor breaking down and we will continue for some more time,” Bandyopadhyay reiterates.
Bandyopadhyay advises that one can get out from this metal space at every possible opportunity.
“Whenever there is a price increase or the market moves up one needs to get out of this metal space but because 12 to 18 months I really don’t see much happening in this space considering the demand slowdown in China and overall the commodity prices, the non-agro commodity prices coming down.”
However, Bandyopadhyay is bullish on capital goods and infrastructure because the investment is going to be strong in the next 12 to 18 months.
“One other sector which we have been watching very carefully is the sugar sector, it has gone through a roller coaster kind of a ride but finally somewhere the de-control of sugar prices looks likely and if that happens there will be probably once again a rerating of the entire sector,” Bandyopadhyay adds.
Mohindar thinks that Reliance has more steam left to give some more support on a medium term basis. According to him technology and banking could give some very interesting short term moves over the next couple of days.