Short term volatility has been increasing and maybe signalling more volatility ahead. Investors should avoid aggressive positions and may trade longs with downside protection using Nifty hedges. Stocks in metal, auto and pharma sectors may look attractive for trading longs, while IT stocks could continue to underperform.
Rohit Srivastava Fund Manager PMS, Sharekhan
Where are we: Nifty closed down after seven months of gains. Midcaps have been underperforming since the May and breadth has been weak for three months even as the short-term shows renewed outperformance of the midcaps again. Selective gains has been the theme for this period.
What is in store: The market appears to be building up for a set back over the last few months as momentum based on the rate of change for the market has been slowing for weeks. Short term volatility has been increasing and maybe signalling more volatility ahead. 10,100 appears like a stiff resistance for the market and 9,780 is the key support level below which selling would intensify.
What could investors do: Lighten up on speculative trades and investment gains in most sectors. The return of strength in mid-caps maybe a good opportunity to do so again. Expect outperformance in metal stocks due to rising metal prices and smaller metal stocks are catching up with the large caps. The second line metal stocks could see some fast moves as they fill the gap that has been widening for weeks.