Home > Market View, NIFTY Strategy > Market correction continues but Infosys,TCS shine

Market correction continues but Infosys,TCS shine

Monday, August 10, 2009 Leave a comment Go to comments

Today was a yet another volatile day with bears finally managing to get better of the bulls. The opening was expected to be strong on strong global cues but the bears has their first pound of flesh in the morning when they outsmarted the bears.

The bulls did try to make a comeback in the afternoon but every high level was met with renewed selling. The NIFTY finally closed 1% lower at around 4440.

It has left all of us wondering -What next ? (This is the only question investors worry about!)

It might be better to divide the market outlook into long term and short term.

In short term- bulls are in real trouble and unless 4380-4400 holds on the NIFTY, it might be very difficult for bulls to recover. Below 4380, this market can slide another 3-4% in no time, with individual stocks correcting 5-8%. On the upside, bulls need a decisive move up (in a day or two) which takes the NIFTY past the 4500 level.We can then be sure about the resumption of the uptrend.

So if you are short term bull, manage your risk properly.It might be better to cut losses than regret later.

In the longer time frame, the upward trend still remains intact and will remain so till we manage to float above the 4000 mark. At the same time, there is a high probability that this markets goes into a sideways mode without making any decisive moves.

Looking at the bigger picture- the renewed threat of bad monsoon has made some investors a bit jittery. It is a fact that bad monsoons affect the rural consumer sentiment in a big way. On top of it, this also means food scarcity and food inflation. And  no stock market investor likes the prospect of lower growth and higher inflation at the same time.

Coming to individual stocks-Infosys was the star of the day. I have been emphasising that Infosys and the IT pack might be the leaders in this rally. I’d advise evry longer term investor or trader to accumulate the stock. Same is true for TCS, Wipro or Satyam, although they are a bit more volatile than Infosys.

Another star was the category of sugar stocks like Balrampur Chini.These stocks might continue to do well if monsoons fail and sugar continues to trend up.

Lastly, Cipla continues to do well. It was another star of the day.

Going forward- I’d be keeping a good eye on the commodities sector. Steel,alumnium,zinc and copper stocks might rally in a big way as soon as expectations for global growth return. So keep Hindalco and sterlite on your watch list.

Oil is slowly and steadily creeping up. This means keeping a close eye on RIL and Cairn India. It might be best to stick to the leaders in each sector.

This also means that we have to avoid a few sectors. Real estate is one sector which needs to be avoided. The sector is over owned by the retail investors and stocks have gone into a sideways or a downtrend.If there is any scare of interest rate rise in the system, these stocks will be hit really hard.

another sector to avoid might be telecoms. Both Bharti and RCOM are not looking great on charts. Bharti in particular looks vulnerable in the short term with critical supports around the 370 area. Short term traders might do well to avoid this.

Auto stocks like Maruti can be picked up if they become available at around 1000. The stock is still in a strong uptrend and remains a good pick.

So if you are a new investor, you might do well to be a little patient. If you are a momentum trader, it might be prudent to get out on trend reversal. If you are an intraday trader, you might continue to suffer with your mind preocccupied with guessing the next moves!

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