Look for stocks outperforming broader indices, sectoral indices

By Vishal Wagh
Research head, Bonanza portfolio

Where Are We: The Nifty has failed to make new all-time high in the first week of Jan-2020, thanks to the US action in Iraq. Nifty has taken multiple attempts to break all-time high in the last three weeks. In the last eleven trading sessions there are multiple candlestick patterns like ‘Tweezer Top’, ‘Harami’ , ‘Evening stars’ & ‘Bearish Engulfing’ on daily and weekly chats but it is not getting converted into follow-up selling. All this formations show that there is strong resistance near to all-time high. At the same time the market is getting bought out on every small dip.

What Is In Store: Whenever, the Nifty managed to cross an all-time high after more than five months of consolidation from an old high there have been a stronger and sustainable rally. Nifty is broadly in the range of 12100-12300. Once the higher range gets broken Nifty will be in uncharted territory. This will create pressure on bears to recover short, if any. On the other hand due to the left-out feeling in bulls/investors there may be panic buying above all-time high. On derivative front max OI in monthly expiry is seen in 12000 strikes Put and 12500 Call. So, for next couple of weeks the range will be 11950-12550.

What Could Investors Do: Investors should look for stocks that are outperforming broader indices and sector indices on higher time frame and hold them for longer period. For purpose of diluting the risk one can use stock SIP model for next couple of quarters. Our major picks include ICICI Bank, Maruti & Tata Motors.