Nifty Likely To March Towards 9,750 After Some Consolidation, JM Financial Says

The market move over the last few weeks has been like a fairy tale. 9,500 was sort of a milestone that the market has reached and now it will be interesting to see how it behaves around these levels for the next few days.

So, while we are not upping our target for now, we are just accessing the situation. The market is looking slightly overbought on the short-term technical charts having run up this far, so soon. This does call for some consolidation.

Now, it remains to be seen whether this consolidation happens in a sideways manner—as has been the case in the last one-month—or the market goes through a 2 to 3 percent kind of a correction. But one way or the other, some consolidation is likely to happen. Post that, once the Nifty confidently passes 9,500, I think that would open another 250 points on the upside. So, the next stop over point for the Nifty is around 9,750.

Logically, yes. That’s the reason I say that combining technicals and derivatives data, how the Nifty behaves around this level will be very important. I personally am of the view that since the Nifty is slightly overbought, there is room for some correction here. So, 9,500 might not get crossed in the immediate attempt.

What you said is absolutely right but I think we need to understand that corrections have indeed taken place in the last few months as the Nifty has run up from 7,900 to 9,500. It is just that the variety of the correction has been sideways and not corrective. Even a couple of weeks back there was this 10-day patch where the Nifty did absolutely nothing. So, a sideways form of a correction is par for a bull market.

It tells you that the market is creating a higher base at every stage. I don’t think that a meaningful correction is really required to make things healthy because according to me 9,000 to 9,200 has now become a very strong base for the rest of this year.

Keeping that in mind, the risk/reward even at 9,300-9,400 is quite favourable to go long. My only concern would be the global market setup because I think the U.S. markets are looking quite toppish at this point of time.

Yes, it is quite interesting that in the last few weeks. The FIIs have been at the receiving end, I mean they have not been aggressively participating in this move from 9,000 to 9,500. If you look at the data over the last one week, it is now gradually that they are coming back. So, I think there is a case for may be liquidity from the FII side increasing over the next few weeks and months. While domestic liquidity seems to be here to stay. The fact that the SIP money is getting into the system very aggressively, I think that will be a great cushion for the market going forward as well.

When we talk about bull markets it is all about opportunity cost and risk/reward ratio. Now in the mid-cap space I think the risk reward is just not lucrative to aggressively long. We are definitely tilting towards the large caps.

We have seen in the last six months that even the largecaps are giving the kind of returns that midcaps typically give you. If you look at some of moves in the banking space, I think it has been phenomenal. We have a target of about 25,000 for the Nifty Bank index, so given that a 15-20 percent upside for many of these public-sector and private sector banks look quite likely.

We remain as positive as ever (on the banking sector). The move in the PSU bank index seems to be a game-changer; it is here to stay. I think there will be phases where PSU banks might see correction but the overall trajectory is clearly up.

No, I think the run up is not at all stretched. I think there has been a structural change out there. When I say structural change, I talk about it technically and fundamentally. I feel that this is a sector which has been underperforming for a decade now.

If you look the S&P BSE Realty index, from a level of 13,000—which is tested in 2007—it fell to a level of 1,000 last year. From there it doubled in value. So, the base is so low that there is a lot of room for the index to go higher. We have seen some excellent breakout in some of these largecap real estate stocks.

Our pick would be banks, autos and metals. Apart from I.T. and pharmaceuticals just about every sector has done well. I think those two will continue to underperform. They are the defensives – money is clearly not there. Also, there is a no relative strength. These are the sectors which are not making highs with the market.

So, since they are negative beta these days, it does not make sense to commit too much into them. They can be an insurance for a portfolio but it cannot be a buy a strong bull market.

The advice to investors would clearly be to stay put because there is much greater return to work towards in the next 6 to 12 months. While there will be issues coming up – on the liquidity and/or global newsflow front – I don’t think that is really going to impact the market too much. For people who are on the side-lines I am sure there will be some opportunity coming by in the next one-month.