Welcome to 2021. We had a fantastic year on the bourses, which gave wild swings from 12,400 to 7,500 and back to hit 14,000, everything packed in a relatively short period of 10 months.
Bhooshan Shanbhag, stock market analyst, opined, "I have never witnessed a bear market lasting for such a short time, and return of the bulls taking the index so quickly to never before levels after a staggering 40% fall in less than a month. That brings up to an important question, where are we headed in the future? Honestly to say, nobody can predict the future, definitely not, when it comes to predicting the financial markets. However, we can only have some observations, and some possible idea about the likely course Nifty may follow in the coming few days.
In my opinion, Nifty has come up too much, too fast, already all the technical indicators are already overbought, or near overbought levels. So, will Nifty continue going up without a breather? In my view, that is less likely. The levels 14,200-14,500 is likely to be a tough one to cross and I am expecting a minimum 10% correction from the current levels, where Nifty should find a support. As of now, Nifty has a minor support between 13,100-13,200, and a stronger support around 12,500-12,600. I would not be surprised if this level is reached in the first few weeks of 2021. This is where I will think of a positional entry in Nifty. Till then, I would be a bit skeptical in the markets.
With resistance located between 14,200-14,500 range, and support much lower, I may think of shorting Nifty futures or buying put options, as and when Nifty gives some crystal-clear sell signal. Talking of last seven trading sessions, Nifty has formed a higher high almost every day, and though it appears that there is some slowing down of the momentum, but no clear signal to go short on nifty as of now. Next few days, it may be a different story. Bank Nifty- When nifty has already reached the blue-sky territory, Bank nifty has failed to scale to the all time high levels. It is still a few percentage points below its all- time high. This indicates that Bank Nifty is underperforming Nifty, and in fact pulling Nifty down to some extent. In case nifty corrects from the current levels, I would expect Banking sector to lead the fall."
While commenting on the stocks, Shanbhag said, "Reliance Industries had a spectacular run in this rally. However, as of now, it is underperforming Nifty. Moreover, with the valuations overextended, I would expect some selling to emerge in the stock in the coming days. The fall from 2,300 to 1,800 odd levels was very sharp due to the same reasons. I would not buy reliance at current levels. If it corrects to about 1,500 or so, then I may consider it a good buy. Till then, I am not going to touch this stock. Of course, I had created bearish positions in Reliance and profited from it in the recent past. I may continue that in the days to come.
TCS and Infosys - Both these stocks have continued their positive momentum in the ‘work from home’ times, and should continue performing well in my opinion. Though the lockdown has been lifted and life returning to normalcy, still there is nothing significant that should change my view about these two. In fact, current continuation of the rally is being shouldered by these two, with Reliance not participating significantly in the last few weeks.
Other stocks like HDFC, HDFC Bank etc. are looking bullish on charts as of now, but I am not so sure about these, should nifty go into a correction mode."
All in all, I am expecting Nifty to correct in January- possibly sooner than later. Thereafter, a small pre-budget rally cannot be ruled out. But then we may reach a flat period which in my opinion, may extend for further 3-6 months. So I am not expecting Nifty to continue the rally for much longer. My positions in the markets now are mildly bullish, with delta neutral or near neutral strategies being followed," concluded Shanbhag.
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