NIFTY BOUNCES SHARPLY ON SHORT COVERING

  • The Monday bounce of over 470 points on the Sensex and 125 points on the Nifty was largely led by short covering ahead of the F&O settlement this week and a truncated banking and trading week. Be caution at higher levels.
  • It may be premature to read too much into the Nifty bounce and the undertone of the market still remains “sell-on-rise”. Private Banks, automobiles and FMCG may be the safer bets in the current market conditions.
  • FIIs were net sellers to the tune of Rs.(-741) crores while DFIs bought Rs.2018 crore on Monday. There were largely block deals and adjustments ahead of the year end and we would not read this data as too suggestive.
  • The Dow and the NASDAQ are up by nearly 2% but the volatility is a clear sign of underlying weakness. Europe is flat as is Asia. We expect the Nifty to again reverse downward from the 10,200 level in a best case scenario. Undertone is weak.
  • Even after the surge in metal stocks, we stay cautious. In fact, for those looking to buy put options, this will be a very good opportunity to buy higher strike puts at lower prices. We expect metals to be the worst hit by any trade war.
  • From an investor’s point, one can look at quality private banks that are now available at very attractive levels. RBL Bank will be a good buy at Rs.465 levels for short term targets of Rs.500 in a month’s time.
  • We like stocks like Marico and Tata Motors which look very favourably priced at current levels. Both have price and traction in their favour and one can look at these stocks from 4-6 months perspective.
  • The Monday bounce could largely be a deceptive bounce and one must not read too much. The undertone remains sell on every rise.

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