JM Fin's Gautam Shah is cautious on market right now. Here's why

Gautam Shah

Associate Director | JM Financial

• JM Fin's Gautam Shah is cautious on market right now. Here's why

• See 5-10% correction in indices; banks to be stressed for 4-8 weeks: JM Financial

• Markets could see major correction of up to 3-5% on Nifty in days: Gautam Shah

Its been three months since the Nifty first scaled the 10,000 mark, and JM Financial’s Gautam Shah believes market action since has been very confusing.

This kind of a move, amid a positive environment, is discouraging as the Nifty has not made higher highs due to selling pressure. His sense is that the current recovery is a relief rally and a temporary one, and it could end once the Nifty hovers around 10,100 levels.

After hitting 10k in July, the Nifty, along with the overall market, has witnessed consolidation. Indices have traded in a range, with bouts of recovery.

“The short term setup and chart patterns are not encouraging. I would be cautious and negative right now on the market,” Shah, Associate Director and Technical Analyst at JM Financial told CNBC-TV18 in an interview.

“But there is clarity on one aspect that this is clearly a battle between liquidity and valuations. At 9700-9800, liquidity support is seen, while around 10,100-odd levels, overseas investors come into play and restrict the upmove,” he noted.

In such a situation, what sectors or stocks could one take shelter in? Shah said the time could be right to look at some defensives. Healthcare looks good, while IT sector looks ripe for a breakout on the upside, he added.

Speaking on metals’ rally, he pointed to how the sector has been the story of the last one year. “Now there is a case for profit booking and the index may just turn sideways,” Shah added. But these declines could be a buying opportunity for the long term, he said.

He is also bullish on the gas space as some stocks have broken out after many years of underperformance. The sector as such has seen a lot of run up, but the story is not over yet, he feels.