February month expiry could be in the 14,400-14,600 range, says Nirali Shah of Samco Securities

Market Outlook

Nirali Shah, Head of Equity Research, Samco Securities is not too worried about the decline that Indian shares saw in the week gone by. No bull market can be a one-way up journey, there will always be corrections, she says.

Investors should book profits from weaker quality stocks and invest on dips in good quality bets, which can make compounding gains in this bull run, Shah says in an interview with Moneycontrol’s Kshitij Anand. Edited excerpts:

Q) It was a week of consolidation, where the Nifty broke below crucial support levels. What led to the price action on D-Street?

A) The market kicked-off the week on a positive note, however, due to the excess froth in the system, markets started to cool off and witnessed selling pressure after touching new highs.

The Bulls and the bears have been constantly trying to out-win each other and due to a lack of major positives, the Nifty couldn’t sustain the highs.

Additionally, no bull market can be a one-way up journey, there will always be corrections on the way up but each dip should be looked at as an opportunity to get into the market and invest for the long term.

Q) The coming week will also see the impact of the monthly expiry. What is your outlook on markets and important levels which one should track? What is the range you foresee for expiry?

A) The market has remained deviated from the mean level for longer than usual and currently, it is trading at accelerated rising channel resistance, therefore we expect a dip up to the lower end of the channel.

Since the Nifty has broken the immediate support of 15050, a sustained price move below the support can trigger some more profit booking. Hence, this month’s expiry could be in the 14,400-14,600 range.

Q) The broader markets outperformed benchmark indices in the week gone by. What led to the price action?

A) As benchmark indices have rallied in full swing over the last few months and valuations are getting overtly expensive, investors are turning towards broader markets for opportunities that can continue to be a part of the Indian growth story.

Small and midcaps may continue to remain in focus due to improved earnings visibility and the valuation gap in several pockets of stocks.

Q) Do you think the bulls are losing their grip on D-Street? Has the market texture turned towards sell-on-rallies from buy-on-dips?

A) Currently, the new high net breadth indicator, which measures the number of stocks making 52-week highs minus the number of stocks making 52-week lows, has posted a negative divergence.

This means that indices are making higher tops but a lesser number of stocks are participating in the rally, which points out the weakness.

However, we are in a long bull run so, investors should book profits from weaker quality stocks and invest on dips in good quality bets, which can make compounding gains in this bull run. We are in a buy-on-dips market.

Q) What is driving the PSU banking stocks?

A) The government’s move towards privatisation and its efforts to meet the disinvestment target for the coming fiscal has led to a rally in the PSU banking space.

Also, favourable Budget proposals such as recapitalisation and the setting up of ARCs have diverted markets’ attention towards these stocks.

Investors are advised to remain cautious as the index is facing high volatility, with PSU banks correcting as much as 4.76 percent on February 19.

Q) Please suggest three-five trading ideas for the next four weeks?

A) Lack of any positive triggers may keep markets dull. Investors should remain cautious and observe the sync in global and domestic movements.

Fresh investments can be made on dips into quality bets as the market is in a longer-term bull rally with intermediate tops in the making.

IPOs are expected to continue flooding D-Street as the sentiment surrounding listing gains remains bullish.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.