By AK Prabhakar

Where arewe?
The market is in a time-wise and price-wise corrective phase. The Nifty made high of 11,171 posts which a correction till 10,276 was sharp and now pullback rally is very slow, expect a rally towards 10,700-10,950 before the next leg of correction where 10,275 and 10,033 are important levels. Till Nifty doesn’t cross 10,800 then next leg of correction can become bit deep. In the worst case scenario, 9,800-9,500 could be possible; while in the best case 10,030 would not breach.

What is in store?
The euphoric market saw a sell-off and mid-caps and small-caps have corrected more than 15-20 per cent while correction in large-caps was hardly 6-8 per cent. Going forward, large-cap growth stock will perform, like ITC, Reliance, HPCL, Power Grid, TCS, Infosys, Zee Entertainment, Coal India, BEL, Titan, to name a few. The next leg of correction, if it happens, small-cap and mid-cap stocks which have weak fundamentals can correct big time and recovery would take time, so avoid lesser-known stocks. Avoid averaging losses as any stock which starts to correct would take a long time to recover.

What could investors do?
An investor should generate some cash, 25-30 per cent would be ideal in this on-going rally and realign the portfolio mix to quality stocks which have not performed in last two years. Outperformers of last 2-3 years can become laggards, while IT and power can be outperformer. Persistent, L&T Info, Cyient, TCS, NTPC, Torrent Power, Power Grid, REC are stocks for the next 12-15 months in our view.

(The author is Head of research at IDBI Capital markets. Views expressed are personal.)