The divergence between building price and momentum panning out over the last three months can lead to a correction for the Indian benchmark Nifty 50 Index, said CLSA's global technical analyst Laurence Balanco, in his latest note to clients.
He also added that the correction, if it does happen, should be looked upon as a buying opportunity, as the drop will only be a short-term blip.
Due to the bullish long-term profile for the Nifty, any short-term weakness back towards the 8,989-9,191 area should be seen as an attractive buying opportunity in anticipation of further gains towards our next target areas at 10,350, 11,547 and 12,000.Laurence Balanco, Global Technical Analyst, CLSA's Note To Clients
The rationale for the three target prices stated by Balanco are as follows:
The picture is slightly different on the global front, said Balanco, who believes its time to harvest gains, adding that it may not be the right time to add any risk to the portfolio.
A break below 2.12-2.16 percent in the U.S. 10-year yield or of Brent crude rices fall below $41.51-43.57 a barrel could lead to a steeper decline over a three-month period. The new record set by the S&P 500 earlier this week, may not be strong enough to sustain the rally triggered by the break above 2,395 on March 1.
"Many of our momentum, breadth, headline indices (Dow Theory non confirmation) as well as credit spreads are flashing their strongest warning signals since early 2015, said Balanco. “These signs of non-confirmation line-up with our cyclical model, which peaks in July and falls into October.”
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