An overbought market could be heading for correction

Momentum indicators are showing overbought territory for the broader markets and hence markets may see some time or price correction before they move ahead to newer highs, say technical analysts. Banking, pharma and media sectors could outperform; while FMCG and IT stocks may underperform in the next one-two weeks, according to them.

By Rahul Sharma, Head ­ Technical & Derivatives Strategy Centrum Broking

Where are we?
Bulls have a strong hold on the market and the Nifty is consistently passing all levels without any major resistance.

What is in store?
Support is seen at 10330 on an immediate basis whereas positional traders can expect 10175-10000 as strong support. Momentum indicators are indicating overbought territory for the broader markets which may see some timeprice correction before we move to newer highs.

Banking and pharma could continue to do well; whereas IT and metals may remain range-bound.

What to do?
Nov could continue to see stock specific action. The Nifty can witness some profit booking and can turn sideways to negative for a few days. As a strategy, one can look to increase cash levels in portfolio or switch to sectors like pharma and select midcaps.

From the Banking space, HDFC Bank and Yes Bank look good for creating long positions.