Sensex and Nifty may have offered 27%-28% returns this year till date, but the rally won’t sustain any longer in December, says Gemstone Equity Research & Advisory Services’ Consultant Technical Analyst Milan Vaishnav, CMT, MSTA. “I do not see any possibility of going beyond its recent highs. Even if there is a sentimentally euphoric reaction to the possible BJP win in Gujarat, besides giving marginal highs, no meaningful break out beyond 10490 is likely,” Milan Vaishnav tells FE Online in an interview. The investors need to remain a bit more active in their portfolios to arrest any chances of erosion in the values of their investment portfolios, he advises. However, at the same time, those looking for a repeat of 2017 returns in December, may still find a lot of opportunities in select stocks, if not outright in the benchmark indices, he says.
Select stocks to look out for:
Upbeat on the markets going ahead, Milan Vaishnav says, “Relative Rotation Graphs have made it evident that in the coming weeks, we will see broader markets relatively outperforming the Index. We will see out-performance coming in from Midcap and Nifty Junior stocks.” Sharing his market investment strategy for the month of December, the consultant technical analyst states, “We feel that Infra, PSU Banks, Energy and Media will distinctly out-perform on a relative basis. We also expect stock specific performance coming from the FMCG pack.” He anticipates the auto stocks will consolidate their overall performance but any meaningful general up move may not be visible in this sector.
Here are the edited excerpts of the interview with Milan Vaishnav, CMT, MSTA with Ashish Pandey of FE Online:
Q. How do you see the markets behaving at present? What are your target levels for Sensex and Nifty this month?
Let us first take an immediate short-term view on the markets. After marking highs at 10490, the markets have developed an intermediate trend in form of a falling channel. This intermediate trend and the formation of the falling channel was validated when the markets formed a lower top of 10410. Post taking support at the 100-DMA, the Index has pulled back nearly 300-odd points from the recent lows. However, going ahead from here, I feel that the levels of 10360-10380 would be crucial to watch. The markets may find resistance around these levels. This channel will be broken on the upside if the markets move past these levels but as for immediate short term, these levels remain crucial resistance area that the markets may face going ahead.
For this month, so long as Index values are concerned, if the markets move past the 10360-10380 area, we may see it attempting higher levels. However, in any case, I do not see any possibility of going beyond its recent highs. Even if there is a sentimentally euphoric reaction to the possible BJP win in Gujarat, besides giving marginal highs, no meaningful break out beyond 10490 is likely. In event of markets resisting the 10360-10380 area, 10200 will remain an immediate major support.
Q. Which are the sectors you are bullish on?
Relative Rotation Graphs have made it evident that in the coming weeks, we will see broader markets relatively outperforming the Index. We will see out-performance coming in from Midcap and Nifty Junior stocks. Speaking about sectors, we feel that Infra, PSU Banks, Energy and Media will distinctly out-perform on a relative basis. We also expect stock specific performance coming from the FMCG pack. Auto might attempt to consolidate its overall performance but no meaningful general up move is expected in that sector.
Q. India VIX moved up by 3.49 percent at 14.14. It clearly shows that the markets will remain volatile in next coming sessions despite a steady surge in the market lately?
Yes, VIX moving up by 3.49% and it shows that volatility has remained ingrained in the sessions. Though VIX offers itself to individual pattern analysis just like stocks, it should not be read singularly. If we look at it in the context of the Markets in general, the levels of 15 to 15.10 would be crucial which mark the immediate high for the VIX. However, that being said, the persistent bearish divergence of the Nifty against its lead indicators over past couple of weeks point towards volatility persisting in the Markets if the markets encounter resistance in the 10360-10380 zones.
Q. What is your advice for the investors?
My advice for the investors would be to remain more activeinn their portfolios. Being passive would see their portfolios not performing in sync with the markets or even erosion in the values. By being active (and not passive) I mean that Investors should properly and in a timely manner effectively rotate their sectors wherein they are invested. It is sure to happen that the sectors that gave them strong returns over past couple of months may now take a back seat. The effective churning of portfolios, remaining overweight in the relevant sectors and rotating the sectors effectively and selecting the right stocks will remain highly crucial for the Investors in coming months.