Nifty50 ended the week with a superb rally, which dragged the markets higher on a weekly basis. Apurva Sheth, Head of Equity Research, Samco Securities, believes that outperformance of the index heavyweights, including IT and financials, led the rally. He also believes that markets are likely to continue in uptrend. Edited excerpts:
Nifty50 regained 18,300-mark on Friday, thanks to the stellar weekend rally. What were the key reasons that pushed the markets higher during the week?
Financial Services and IT stocks have been the primary contributors to the up-move in Nifty 50 this week. Both were up more than 2% for this week. The weightage of these two sectors combined in Nifty is more than 51%. Seven out of the top 10 index heavyweights in Nifty 50 are from these two sectors. All of them have done well for the week.
Nifty Bank hit new highs during the week, outperforming the Nifty50 index. Do you see it sustaining the momentum? If yes, then what are the key support and resistance levels for the index?
Yes, Bank Nifty will sustain its bullish momentum. The banking index on the weekly timeframe has witnessed a bullish breakout above its horizontal trend line, which is placed at 41,800 levels. The key support for Bank Nifty is at 41,650, followed by 41,000 levels and the immediate resistance will be at 43,000 levels.
For the current expiry, how should traders plan their strategy to maximise returns for Nifty and Bank Nifty? Do you think it is a good time to short in either of the indices?
Currently both the indices are trading in a higher high, higher bottom formation on the daily charts, which indicates a classical uptrend. As is said, ‘Trend is your friend’, one should not think of shorting without any solid confirmation.
As both the indices are trading higher, buy on dips strategy can be used as we can see marginal throwback in prices. One should keep trailing their stoploss higher as the trend progresses further.
PSU banks have been the standout performers lately, with index rising about 7% during the week. What is your take on the state-run lenders? Do you think there is more steam left in them? If yes, what are your top picks?
It seems that PSU banks can take a breather for now and remain on the back seat. Private sector players like moved up almost 8% during the week. Other private banks could join it next week.
The Nifty Private Bank to PSU Bank ratio suggests that underperformance in private banks may halt for now. We could see rotation out from the PSU banks, which have moved up a lot during the last few weeks and it seems that it is the turn of private banks now to move up next week.
After the beatdown, IT stocks are back in favour among the investors. Do you see any trade opportunities there? If yes, what are the stocks investors should look to trade on a short-term basis?
Samco has always been bullish on IT sector stocks since June 2020. We believe that IT stocks have bottomed out not only in India but also in the US. The percentage of Nasdaq 100 stocks trading above their 200 DMA had hit a low of 9% in September 2022.
We had seen similar levels during Covid lows and in 2008. The rally which we saw over the weekend in the US and the Nasdaq in particular, indicates that there is more steam left in the IT sector. Indian IT stocks are available at attractive valuations. Thus, it is a great opportunity to invest in the US and Indian IT stocks. One can go ahead and buy Nasdaq and Nifty IT ETFs.
There are early signs that attrition in the Indian IT sector has peaked out. The new hirings across the companies have begun and margins have started expanding gradually. The recent beating down in IT sector stocks have made valuations compelling. Entry at the current level in the top rung IT stocks may reward the investors handsomely going ahead.
Pharma stocks have remained under pressure this week. Do you see them more prone/vulnerable to fall further? Which counters should investors pick and/or avoid from the pharma pack, based on the charts?
Couple of weeks back the Pharma Index has given a falling channel pattern breakout, so we can consider this week’s fall as a throwback near its trend line support, which is placed at 12,800 levels.
Not all the ingredient pharma stocks of the index are showing signs of active participation, but some are strong and are out performing against the Nifty Pharma index.
On the basis of the broader time frame,
, and have shown positive breakout and most likely will continue their outperformance.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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