Markets Need to Sustain Above 18,000 to Gain Momentum
It is clear that the Nifty is facing some resistance near the level of 18,000. The markets need to cross 18,000 and then 18,200 becomes the next hurdle where we can see some supply coming in. The good part for investors is that the downfall has been arrested at least for the immediate near term. That said, another bout of selling and weakness cannot be ruled out and hence investors and momentum traders are advised to work with strict stop losses and avoid leveraged positions at this point of time. What is interesting to note is the outperformance of the broader markets.
The result season has been good, and several companies have been able to beat the market estimates, thus creating a positive momentum in select counters. Globally, the markets are reacting positively to the record earnings’ growth, and it looks like the global markets are in no mood to correct in a hurry. At best, the global markets, especially the US markets, are expected to gain ground in the coming weeks assuming there are no adverse comments from US Federal Reserve which may negatively impact the market sentiments. The realty stocks continue to surprise on the upside while the automotive stocks are showcasing relative strength.
The PSU pack is showing lot of promise, especially PSU Banks. There seems to be some value buying in PSU Banks. Stellar Q2FY22 performance by State Bank of India (SBI) only goes to prove the point. Canara Bank, Bank of Baroda and SBI are witnessing good amount of buying interest and are backed by quality results this season. The focus should clearly remain on those stocks which have declared strong quarterly numbers where the management guidance has been strong. Also, the stocks which have hitherto run up too strong may be the stocks one needs to be careful about.
The chemical stocks have had a dream run; however, several of them are witnessing profit booking and are seen underperforming owing to disappointment in the results. Remember, in the long run the markets are slaves to earnings. Keep a close track on earnings’ quality and build position accordingly. The metal pack in recent trades has attempted to stage a comeback. It is likely that the metal pack will remain in the limelight. Within the automotive space the two-wheeler manufacturers are showing relative strength and should be tracked by momentum investors. The Tata Group shares have not moved much in the past one week. One can expect some action next week once the markets reopen after a long holiday.
Another area where the buying interest is visible is where the quality stocks have taken a beating and are down anywhere between 15-25 per cent. Some buying is seen in the beaten-down stocks. Investors and traders can hunt for such opportunities as the markets attempt to make a strong pullback. IT stocks, industrials and the PSU pack are showing some optimism. A bottomup approach in these stocks can open new investment opportunities. Overall, the mood needs to be cautious as the markets are struggling to build gains and turn slippery each time they approach near the 18,000 level. The resistance level for the market remains in the zone of 18,000-18,050 and the key support area for the market remains in the zone of 17,450-17,400.
