Nifty To See More Reversal Before Upward Trend, Says Analyst

The index rose for the third consecutive week, even as it closed down on Friday.

<div class="paragraphs"><p>(Source:&nbsp;<a href=";utm_medium=referral&amp;utm_content=creditCopyText">Unsplash</a>)</p></div>
(Source: Unsplash)

The Nifty might see some more pullback before it continues its upward trend, according to Ruchit Jain, lead research analyst at 5Paisa Ltd. Markets are seeing sectoral rotation as underperformers gain focus. There might be some more profit-booking and corrections, he said.

The index rose for the third consecutive week, even as it closed down on Friday. It has risen 8.14% year-to-date.

"For now, there are no signs of a complete reversal. But yes, after the recent up-move, the overbought momentum set-ups are cooling off. So, we can expect some more pullback moves before resuming the uptrend," said Jain.

There are no sellers in the market, according to Dharmesh Kant, head of equity research at Cholamandalam Securities Ltd. This means that when the buyers focus on a theme or sector, there is a "crazy upside." This is moving the markets, according to him.

The information technology sector has been underperforming for the last few quarters, according to Kant. The Nifty IT rose 0.76% on Friday. While the sector has seen no fundamental change, it has seen growth based on hope that things will change in the next six months, he said.

The sector has already passed the price correction phase, Jain said. Its consolidation phase is on track and he doesn't see the sector seeing a downward trend.

The railway sector has also been on an upward trend. Both Kant and Jain are bullish on railway stocks, with Rail Vikas Nigam Ltd. and Railtel Corp. of India being their top picks.

Both said they would stay away from fertiliser stocks. The stocks are trading at very high multiples of 20 and 25, even as their growth rate is between 10-12%, Kant said.

The risk-reward ratio is poor for the stocks, according to Jain. However, if one wants to play this cycle, then they need to enter at the beginning instead of chasing the rally, he said.

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