“Some of the largecaps can end up supporting the market which is where you will have to focus. But it is always tough to trade stocks in a counter trend bounce. So, if I say that this is only a bounce after which we may fall further, then individual stocks are very tough to catch.”
“The 20-week average for the Nifty Smallcap Index is close to the 12,000 mark and we currently are at around 12,500. That is another 500 points lower for the Nifty Smallcap Index. So, we are not done here. In fact, the smallcap index has corrected slightly less than the midcap and so there is still more room for the smallcaps to correct relative to midcaps.”
Rohit Srivastava, suggests moving into the metal sector as the Indian metal stocks have performed well despite low commodity prices. He believes that if the rally in the dollar is coming to an end, commodity prices will rise again, leading to significant outperformance in the metals sector. Srivastava also mentions that the pharma sector has a good setup for a final rally, particularly in midcap stocks. He sees the dip in the Nifty Realty index as an opportunity for further upside.
So I think that is a good thing. It may last for a while. We should be open to this corrective pullback going on for some time. In terms of levels, the worst case scenario I think would be as low as 19,600, which is just around 61% of the recent rally that we saw from the low in August. It does not necessarily have to go that far, but that is like I said, the worst case scenario. In between, we will be looking at somewhere around 19,780 as an interim support if it holds.
“Both the mid and smallcap indices now are coming very close to the 20-day moving average and that is more significant because that is where we will expect them to get support and bounce back over the next couple of days. For example, the Nifty small cap index 20-day average is at 12,242 and the midcap index is at 39,347, both these levels will hold and we will probably see an uptrend. ”