Nifty near 5600: Should investors invest now?

The market is likely to remain volatile in the near ahead of the June series F&O expiry this week

June 25, 2013 3:20 IST | India Infoline News Service
The Nifty is trading close to its crucial psychological level of 5600 on account of foreign institutional selling and concerns over Chinese growth. From its peak of 6229 hit on May 20, the Nifty has fallen 10.65%.

Given the huge volatility in markets, it is not surprising that investors are rushing to the comfort provided by fixed income options. But given that India's long-term story is intact, the moot question is whether investors use the fall as a buying opportunity.

IIFL chairman Nirmal Jain says, markets may be near bottom and are likely to find some support soon. Valuations will become attractive at 5400-5500 on the Nifty. The current scenario is not conducive for additional money flow in India. Foreign institutional investors have sold more than Rs. 90 billion shares in previous 10 consecutive sessions since June 11, Jain points out.

The market is likely to remain volatile in the near ahead of the June series F&O expiry this week. The recent correction provides investors an opportunity to invest in high quality private banking stocks carrying strong earnings growth visibility such as Axis Bank, HDFC Bank, Yes Bank and IndusInd Bank. Public sector banks though appear oversold are less likely to bounce back in the near term given their weak earnings outlook, according to some analysts.

Commenting on whether small investors can enter the market, Pankaaj Maalde, head-financial planning, ApnaPaisa.com, says, “One should not try to time the market, This is the first principle while investing in equity. SIP (systematic investment plan) with a long-term horizon is the best way to accumulate the wealth. Investing lump sum does not make sense looking at current economic conditions.”

Most important is the time horizon which should be long term i.e. more than five years. In the current market scenario, it is advisable that lay investors can start investing in diversified equity mutual funds such as Franklin India Bluechip, ICICI Prudential Focused Bluechip Equity, HDFC Top 200 and BSL Frontline Equity Mutual Fund among others. Investors should check the track record of the fund before investing in it, Maalde elaborates.

It is advisable for small investors to enter the market when Nifty is at 5470 levels and invest in blue chip companies, an analysts from a leading Mumbai-based brokering firm adds.

Investors should stick around at 5540-5600 levels for some more time and wait for markets to stabilise. A confirmation of reversal comes above 5750-5800 levels. On Dow theory 5477 is the level which if holds, we will remain optimistic over the long run, CEO, Analyse India Market Solutions Pvt Ltd, highlights.

Dow theory is a theory of stock market forecasting based on price movements of selected industrial and transportation stocks.

Nifty has been in a short term downtrend and has closed below the crucial levels of 5,680. The index faces crucial hurdles at 5,650-5,680 levels on the upside, expect selling pressure to continue at higher levels. One can expect decline towards the 5,550 & 5,520 levels in the near term, Nirmal Bang elaborates in a report released on Friday.

Commenting on the market outlook, Pritesh Mehta, senior technical analyst, IIFL, says, “The blood-letting is not over. Nifty is falling towards 5477 levels as it failed to find support at 5683. This level was last recorded on June 13 from where the recent corrective rally started. Since 5683 level is broken, we see the Nifty retracing back to its April lows of 5477. Weekly chart suggests that Nifty may test the lower range of the Bollinger band support at 5480 levels.”

Bangalore-based technical analyst Shivaji Bhandari is of the view that investors should look for quality large cap names. Now Nifty should hold 5550. At 5750, one can look to book profit and stay on sidelines till 5868 is taken out and enter again.

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