Rohit Srivastava, Founder, Indiacharts.com, says “I do not think we will dip and fill the gap much. In fact, we may see a continuation of this move higher. You will have to selectively look at where you can come in with fresh trades as more and more stocks start to participate. We have not really seen the entire market participate in this move. Which is why there will be many opportunities in individual names to pick on even though the index may appear to have already moved up a bit, we are probably not done with this move.”
After this gap up opening, should one buy the momentum or should one wait to fill the gap and then look at buying more positions as far as Nifty and Nifty Bank go?
In bullish markets, sometimes the gaps do not get filled, at least not immediately till the next cycle of correction comes in. I am not so sure whether this gap will get filled. I know what happened in the early part of this week, especially over the Diwali weekend as we gapped up on Diwali Day, the firecrackers went off and then the next day, a lot of the gains were given back.
But just because that happened the first time, we should not expect it would happen every time. The fact is that the market still has huge short positioning even as of yesterday. The net short held by FIIs was around 1,47,000 contracts on the index futures and they have actually not really covered much of the short position. So, there is a lot of bearish sentiment out there which was created because of this US recession risk, which according to me has not really gone away.
But markets often trade on sentiment and positioning and the sentiment remains extremely negative. It is going to take a while for that to get cut and till that happens we should expect prices to move higher. So, no, I do not think we will dip and fill that gap much. In fact, we may see a continuation of this move higher. You will have to selectively look at where you can come in with fresh trades as more and more stocks start to participate.
We have not really seen the entire market participate in this move. Which is why there will be many opportunities in individual names to really pick on even though the index may appear to have already moved up a bit, we are probably not done with this move.
You are saying a lot of individual names now will start participating as well. So, where in the market are you seeing those individual names? Which sectors or any names would you want to give us specifically?
Without really making any recommendation because we are not investment advisors, I will highlight a couple of stocks which have been actually breaking out of seven-eight days of congestion. One of them is, of course, Reliance Industries itself, trading above 2340. After seven-eight days of being in this noisy range, it is actually closing slightly above that or trading above that. Let us see if it closes above that, that is important.
If it does, then that is a positive sign. We are also seeing something very similar in Kotak Bank. Banks have generally been the most beaten down part of the market and Kotak has actually been an underperformer. But again, the same pattern; for seven-eight days, it was in the same price range. Today, it is trading slightly higher and if it does close above that range, it could be a positive indication. Those are the things to watch out for where you can get fresh breakouts from stocks that are not participating and they are key index stocks so they could drive the index higher that is what you would watch out for.
What do you do with banking names right now? They are completely sluggish and we are not seeing the momentum that we are seeing in the rest of the markets?
Yes, I do think they should pick up because Bank Nifty also did get oversold at the recent lows for some reason. We have not seen that interest really pick up. But I do think they will participate on the way up. You cannot have a market rally without participation from banking. It is worth paying attention to. But it might not be the outperforming sector. The outperformance may still go back to where it was earlier which is in, say, PSU stocks, for example.
We are seeing the PSU oil companies, for example, do well today, the likes of ONGC picking up. So, one should go back and focus on PSUs because that remains a strong sector. You may also find other spots to do better than banking itself, but that does not mean banking would not head higher. I think it will pick up with the market.
What is expected from IT? We are seeing very subdued moves even now. Any view on the Nifty IT or specifically the midcap IT, would that be more interesting now to watch out for?
I am completely avoiding the IT, especially the largecap IT. The setups really got spoiled in the recent sell-offs. We were thinking that they would build up constructively, but they failed and so it is something that we do not really want to touch upon. Probably midcap IT very selectively is doing well. If you run a relative strength outperformance chart, you will find a couple of stocks as outperformers, whether it is Birlasoft or something like that, you try to find those which have really done well on a two-month, three-month perspective and then end up focussing on that.
But in general, most of the IT stocks which are not performing might just continue to stay that way. So, we really do not want to waste time there.
Siemens has seen a breakout; it is 4% higher, on the basis of the news flow that we have just got about the transaction that the Street was worried about. How is the overall momentum looking like?
I am not really recommending anything, but I did think that it made a triple top close to around just below the 4,000 mark and from there, it sold off pretty sharply. Given that, all I would expect right now is some kind of a retracement of that fall, probably not a move back to new highs. We would look at maybe a 50%, 60% retracement and that would give us some guideline in the near term for upside. But not really thinking that it can make new highs.