Nifty headed towards 18,500 in May. Should you buy on dips now?
ICICI Direct expects the ongoing rally in the Indian market, which has managed to hold the March low of 16,800, to move gradually towards 18,300-18500 by May with strong support at 17,200. The buy-on-dips approach with focus on midcaps is recommen...
By Akash Podishetti, ETMarkets.com |
THE ECONOMIC TIMES
The benchmark Nifty managed to hold the March low of 16,800 and ICICI Direct expects the current rally to have more legs.
The brokerage sees Nifty gradually heading towards 18,300-18500 in May in a non-linear fashion with strong support at 17,200. In this scenario, investors can stick to the buy-on-dips approach with a focus on midcaps.
Equity benchmarks have delivered muted returns so far this year, even though the rate hike cycle is on the cusp of a pivot. Markets were hit by the Adani-Hindenburg saga and sustained outflows from foreign investors. However, the indices have been more or less stable, without a steep fall towards the slope.
Sensex and Nifty are trading in red on a year-to-date basis, down 0.5% and 1.2%, respectively. The IT stocks have taken a strong beating on the back of poor fourth-quarter results and weak outlooks going forward.
However, the pain in the IT space was offset by financials, which so far have been the pick of the March quarter earnings.
ICICI Direct said the current rally from March lows is now the largest in magnitude in five months, and consequently, the index has logged a breakout from four months' falling channel, indicating a resumption of the uptrend.
Historically, May has been a turbulent month half of the time over the past two decades. However, data shows that investing in May has produced an average double-digit return by calendar year-end 83% of the time.
Some key risks to the expected rally in the coming month are global events that could lead to volatility in pockets even as the dollar index breaks below the 100 mark.
ICICI Direct has HDFC Bank, IndusInd Bank in BFSI, BEL, NHPC, Coal India in PSUs, ITC, Asian Paints in consumption and retail as its top picks for May.
The brokerage sees Nifty gradually heading towards 18,300-18500 in May in a non-linear fashion with strong support at 17,200. In this scenario, investors can stick to the buy-on-dips approach with a focus on midcaps.
Equity benchmarks have delivered muted returns so far this year, even though the rate hike cycle is on the cusp of a pivot. Markets were hit by the Adani-Hindenburg saga and sustained outflows from foreign investors. However, the indices have been more or less stable, without a steep fall towards the slope.
Sensex and Nifty are trading in red on a year-to-date basis, down 0.5% and 1.2%, respectively. The IT stocks have taken a strong beating on the back of poor fourth-quarter results and weak outlooks going forward.
However, the pain in the IT space was offset by financials, which so far have been the pick of the March quarter earnings.
ICICI Direct said the current rally from March lows is now the largest in magnitude in five months, and consequently, the index has logged a breakout from four months' falling channel, indicating a resumption of the uptrend.
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If this uptrend were to continue, the brokerage expects mid and smallcaps to play catchup in the coming month, backed by stronger breadth readings and sectoral churns.Historically, May has been a turbulent month half of the time over the past two decades. However, data shows that investing in May has produced an average double-digit return by calendar year-end 83% of the time.
Some key risks to the expected rally in the coming month are global events that could lead to volatility in pockets even as the dollar index breaks below the 100 mark.
ICICI Direct has HDFC Bank, IndusInd Bank in BFSI, BEL, NHPC, Coal India in PSUs, ITC, Asian Paints in consumption and retail as its top picks for May.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
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