Bulls to dominate stock markets, experts advise reducing risk

NEW DELHI:  After eight weeks of consolidation and range-bound trading, India’s equity markets had a record rally last week. The NSE Nifty50 created history by crossing the 16,000 mark while  the BSE Sensex gained 3 per cent to touch a lifetime high of 54,717 points.  

On an average, the two benchmark indices, helped by heavyweights such as Infosys, TCS, ICICI Bank, and the HDFC twins, gained around 3 per cent during the week. Experts believe that, going forward, the bulls are likely to dominate the market as India’s economy is recovering from the second Covid-19 wave and corporates are reporting better-than-expected financial results the first quarter of the current financial year (Q1FY22).  “Technically, on weekly charts, the Nifty has formed a strong breakout formation, which indicates a further uptrend from current levels,” said Shrikant Chouhan, executive vice president, Equity Technical Research at Kotak Securities.

He added that the medium-term trend is bullish and buying on dips and selling on rallies would be the ideal strategy for the positional traders. “The 16150-16050 (Nifty) level would be the strong support zone for the index. Trading above the same, the uptrend wave is likely to continue till 16400-16550 levels. Below 16050, breakout traders may prefer to exit from trading in long positions,” said Chouhan. 

Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking, advised traders to reduce their holdings if the Nifty reaches as high as the 16,400-16,500 level. “Although, the upward trend has just resumed, we would advise short term traders to start lightening up positions if Nifty reaches the mentioned levels in coming days,” he said. He added, “We are not at all advising to go against the current trend; but at least taking some money off the table on existing positions is always a good ploy.”

This week, market momentum is likely to be decided by inflation data, to be released along with IIP on August 12.  Multiple heavyweights will also release June quarter earnings, whereas four IPOs—Car Trade, Nuvoco Vistas, Aptus Value Housing and Chemplast Sanmar—will hit Dalal Street during the week. 

Mid- & heavy-weight stocks favoured
Most analysts recommended stocks of mid and heavy weight companies. Motilal Oswal recommends largecaps such as ICICI Bank, SBI, Infosys, HCL Technologies, UltraTech, M&M, HUVR, Titan, Divi’s Labs, SAIL, and SBI Cards and Midcaps such as Max Financials, Chola Finance, JK Cements, Indian Hotels, Deepak Nitrite, Burger King, ICICI Securities, Orient Electric, etc.