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    Ignore Nifty and Bank Nifty, invest in broader market: Goldilocks Premium

    Synopsis

    Top 2-3 names of agri, power, fertilisers sectors look good for medium term

    Gautam Shah-Goldilocks-1200ETMarkets.com
    Nifty is not going to give you great upside from here but the broader markets will do that, says Founder & Chief Strategist Gautam Shah.

    The Nifty is moving back higher on the back of some positive news around the world on the vaccine. It is once again the defensives that are coming to the fore. How are you reading into the current mood in the market and the direction you see us taking from here?
    Markets have a trajectory of their own because the moment you try to combine what is happening in the economy and try to map the markets, it is going to be a different ball game altogether. Having said that, we have had a phenomenal run up from the March lows. We are up more than 40% and at levels of 10,600 a couple of weeks back, you had an indication that it was the best attempt for the markets to end the pullback rally and start a downtrend but the support levels never broke.

    In fact, in the last six weeks, every time the Nifty got close to support levels, it has found buying interest that tells you that the market is looking into the future and trying to discount some positives that we do not have right now. We have to respect the price action.

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    From a charts perspective, after yesterday’s fall, the kind of comeback that we have today just tells you that the market is finding a lot of buying interest at lower levels and for a change, the financials have taken a back seat and many other pockets in the market whether it is Reliance, whether it is IT, metals, autos -- a lot of them are contributing to the market rally. I think there is some more juice left in this particular move.

    We see the Nifty hitting the level of 11000-11050 and around those levels, we will have to review whether there is more upside or not. For now, the opportunity is still on the long side and till the Nifty trades at levels beyond 10550, we remain bullish and our biggest opportunity is on the midcaps and the small caps where there is still a lot more upside to play for.

    How would you strategise? Would it be primarily with the basket of names that continue to be prominent -- financials, consumption? How would you break up the ideal portfolio right now?
    The financials are to be avoided. In the last one week, Bank Nifty has actually taken a back seat. We do a lot of relative strength studies and the ratio chart of Bank Nifty over the Nifty that we track is downward sloping. I do not think banks are going to make a major comeback anytime in the near term.

    At best, they will stay in the large range and therefore the opportunity does not lie in the banks. But outside of that, the pharma space has been very bullish for the last few months now. We are looking at a target of about 10,700 and eventually 12,000 on the pharma index.

    A lot of popular pharma stocks are setting up for fresh breakouts which could happen over the next few sessions. Metals have completed a bear market and are now setting up for a very large recovery and some metal stocks have shown relative strength,

    Nifty has gone through small corrections but metals have been very steady and now as the markets are coming back, metal stocks are looking good for a 20-25% up move. The top names from the current levels. Reliance and Bharti have been favourites all along and there we do not see signs of topping out.

    Apart from this, the IT index is at 16500. I think midcap IT is one pocket that we like from a medium term perspective. So, great opportunities are there as well.

    Let us talk about the midcap index as well. There are high chances of a rebound. Within that pocket, if one had to be fairly stock specific, where would you take your chances?
    What we have noticed is that a lot of laggards have gradually made a comeback. Stocks that were well destructed for a couple of years have doubled or trebled in value in the last three months. This would continue because the price destruction in the last three years was so large that the scope for recovery is equally large. As we speak, the midcap index is close to 1540 level.

    Once this is surpassed, we could see another 5-7% upside on the midcap index and there are various pockets in the market; the agri scheme looks excellent, the midcap IT, some of the power stocks, some of the midcap capital goods stocks, some of the auto ancillary stocks, sugar names, fertiliser names all of them have excellent setups. This is a good time to ignore the Nifty and the Bank Nifty because that is always playing on our minds. But if you ignore those names and trade this market or invest into the market, it is going to be far more comfortable. The stock specific theme is going to carry on for the rest of this year and I do not think Nifty is going to give you great upside from here but the broader markets will do that.

    You spoke of agri, power, fertilisers. Would you like to delve into names of stocks within these spaces that you find interesting?
    Not names because different stocks have different setups and different levels but broadly as a theme, I like to stay with the leaders and so the top two or three names in all the sectors that I mentioned look excellent from a medium term perspective.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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