In an interaction with Gaurav Bissa, Vice President - Equity Advisory, InCred Equities
Broader markets continue to look strong with fresh breakouts seen in Nifty Midcap and Nifty500 indices, states Gaurav Bissa, Vice President - Equity Advisory, InCred Equities
What is your general evaluation of the current market situation? Will Nifty continue to hold its upside after moving more than 4 per cent in the last 10 days?
The undertone of the market remains positive with consistent formations of higher highs and higher lows in the daily timeframe. However, Nifty is now trading near its rising wedge hurdle on the weekly charts at 19600-19650 zone which coincides with a rising channel resistance on the daily charts. The RSI has reversed from around 80 levels, which is near the major resistance of 83-84 levels which has resulted in profit booking in the past. This implies the index can witness some pressure at higher levels which can pull it towards its 21ema support of 19,000 on the daily charts.
How do you anticipate equities to perform over the next six months? What are the major downside risks?
Equities have seen a sharp rise in the last couple of months with strong gains seen across sectors and market cap categories. Momentum indicators are approaching overbought zones which may result in some profit booking. However, a major fall is not expected at this point as many of the major sectors continue to look strong and any correction in them is unlikely to change their long-term uptrend. This can ensure the fall is limited and likely to be bought into which may result in resumption of the uptrend in Nifty.
What are the three sectors that you think appear promising and offer potential for investment in the long term?
Nifty IT is reversing from a long-term breakout area. Since it is in a 20-year uptrend, the expectations are it can form a fresh swing high in the coming months. This can provide strong wealth creation to investors with a horizon of 2 years.
Nifty Pharma is another sector to witness a reversal on long-term charts. The stock has reversed from the ascending broadening wedge pattern on the weekly charts and can move towards 14500-15000 levels. A monthly close above this will trigger a cup and handle pattern breakout on the monthly charts which can result in a fresh uptrend, thereby providing strong alpha to the investors.
The third space which looks very interesting is the Nifty PSE index. It has witnessed a 15-year breakout on the monthly charts and is expected to witness a move towards 7000 levels which can provide lucrative investment opportunities with a time horizon of 2 years.
In the previous week, both Small-Cap and Mid-Cap stocks outperformed the Sensex. Given this broader market trend, what strategies should be employed to navigate the upcoming week?
We have been very bullish on midcap space since April 2023 and markets were kind enough to reward our studies. Broader market indices continue to look strong with fresh breakouts seen in Nifty Midcap and Nifty500 indices.
Our strategy at Incred Capital has been to focus on midcap stocks in sectors which are showing strength. For example, we have been participating in IT midcap stocks which were then shifted to midcap PSU stocks followed by realty space. This sector rotation helped us to generate alpha which we continue to believe can be seen in sectors witnessing fresh breakouts like consumer durables, pharma and infra going forward.