As long as Nifty is below 10,930, threat of significant correction looms; Here are 3 short-term bets
The S&P BSE Sensex rallied over 200 points to reclaim Mount 35K on Monday while Nifty50 rose for the third consecutive day in a row to close above 10,680 levels helped by short coverings.
“The Nifty rose for the third consecutive day on the back of positive cues and buying momentum. Short covering was seen being triggered in the market as the index breached the upside of 10,650-10,600. The BankNifty edged to 26,700 and successfully closed above 26,500,” Mustafa Nadeem, CEO, Epic Research told Moneycontrol.
The market began the expiry week on a strong note with Nifty reclaiming 10,700 levels in intraday trade. The rally on the index was led by banking stocks, followed by pharma, realty, auto, as well as metal stocks.
Nifty IT that fell nearly 2 percent due to recovery in the rupee. TCS, Infosys, Tech Mahindra and HCL Technologies are down 1-4 percent.
The market breadth was firmly in favour of advances. The NSE Advance-Decline ratio stood at 3:1 while the put-call ratio improves to 1.52 from 1.47.
"Markets opened higher in a trade Monday on the back of positive global cues, this rally continued throughout the session with the markets closing up over a percent for the day. IT underperformed in trade today whereas banks held up for the session, Sun Pharma, and BPCL were the best performers of the session," Nikhil Kamath, Co-Founder, Zerodha told Moneycontrol.
"We are neutral on the indices at the current juncture and would not advocate entering fresh longs at this point, the markets at the current level still look overvalued and uncertainties over the impending elections could take the markets lower again," he said.
Sectorally, the S&P BSE Capital Goods index rose 2.5 percent, followed by the S&P Oil & Gas index which gained 2.4 percent, the S&P Healthcare index was up 2.1 percent, and the S&P BSE Banking index closed 1.1 percent higher.
Sensex top gains include stocks like Sun Pharma (up 7.1 percent), Coal India (up 3.2 percent), L&T (up 2.5 percent), Asian Paints (up 2.3 percent), and SBI (up 1.9 percent) etc.
Sensex top losers include names like TCS (down 2.3 percent), followed by Power Grid (down 2.3 percent), Infosys (down 1.1 percent), and M&M (down 1 percent).
Stocks in news:
Shares of Manpasand Beverages hit lower circuit after Deloitte Haskins and Sells resigned as auditor ahead of the company’s quarterly results scheduled to be released on Wednesday. The scrip tumbled 20 percent to Rs 344.80.
The management in its clarification note said everything related to financial results announcement and the timing of this event is purely coincidental and has no direct correlation. The board meeting has been postponed and the new date will be announced shortly.
Auto air conditioning manufacturing company Subros has reported healthy earnings for the quarter ended March 2018 as profit more than doubled to Rs 18.6 crore compared to Rs 9.1 crore in same period last year. The stock closed 7.5 percent higher.
SpiceJet is locked at 20 percent upper circuit following correction in oil prices and after brokerage house, Stewart & Mackertich Research initiated coverage on the airline with a strong buy rating. The brokerage house has set a target of Rs 154 on the stock, which implies an upside of over 50 percent compared to the closing price of May 25, 2018.
Shares of Sun Pharmaceutical Industries rose 7.1 percent as research house including CLSA and Macquarie has upgraded rating on stock post Q4 numbers. The company's consolidated net profit rose 6.94 percent year-on-year (YoY) to Rs 1,309 crore in the fourth quarter ended March, beating analysts' estimates.
Software services firm Tech Mahindra Ltd’s shares fell nearly 4 percent. It saw its biggest intraday percentage loss since May 29, 2017, as shares fell 5.6 percent. According to Nomura analysts, telecom sluggishness has kept them “cautious on growth”.
CLSA analysts said further margin expansion depended either on a growth recovery in telecom or a rise in offshore leverage and that looked unlikely. It has raised the price target to Rs 600 from Rs 540, and ‘sell’ rating.
Share prices of oil marketing and aviation companies rallied between 3 percent and 20 percent after a sharp correction in crude oil prices from 2018 high.
In other news/Global update:
Oil prices continue to correct sharply, with Brent futures falling 1.4 percent to $75.35 a barrel as Saudi Arabia and Russia may increase supplies. Rising US production also showed no signs of abating.
Asian markets ended mixed amid an extended slide in oil prices. European stocks were trading mildly higher despite political uncertainty in Italy.