Buy on declines

Nifty fell about 1 per cent completing three weeks fall. It suggests that the market is resilient considering weak monsoon data, global cues etc. Market is waiting for the big event of Union Budget slated on 10th July. Although, Modi may not have a magic wand in his hands to turn the economy overnight, but the policies he is expected to initiate would show the commitment and direction and the market is going up for the last 8 months only on that expectation.

However, any deep correction is also welcome, as it would give an opportunity to buy quality stocks at reasonable prices. In fact, most medium / long term investors are waiting for correction to buy as most have missed the rally. Technically, medium and long term trend is quite bullish a short term trends keeps vacillating. A sizeable correction is due and it is to be seen whether the same would take place immediately after budget or after the euphoric rise.

Government’s policies would indicate their thrust areas and sectors that would benefit out of it. However, Infra, Power should be the core areas which any Government that harps on Growth cannot ignore. Hence, companies in the above areas with sound management may be preferred. The sectors which had underperformed due to policy inaction may be preferred.

Stock specific approach is to be followed and general positive sentiment can be expected to continue over Medium term. Market is bullish in long and medium term time frames and short term trend keeps oscillating and can be ignored by investors. Key support levels for the above time frames are 6500, 6800 and 7400 respectively. Sectoral rotation has become order of the day and different sectors should be tracked to discern individual stock trends. Investors need to accumulate quality stocks while traders need to be ever vigilant.

Nifty continues to be above 200 DMA and 50 DMA too is above 200 DMA suggesting that the long term bullish trend is intact. Even with the recent rise, Nifty is quoting at a PE, which is about 15 per cent above the long term PE multiple. Hence, further upside (8000+ is possible during the year) in view of the stable and performing Government at the centre as earnings would go up because of favourable atmosphere.

Further, Nifty had been trading in a range of 4600 to 6300 for more than 4 years and a powerful breakout has taken place for an initial target of about 8000 / 8500. When fundamentals too start improving, further rise over a period can be expected. Hence strong long term support would be around 6500 level and Medium term support is 6800.

For the coming week, Nifty spot is expected to face resistance at 7595, 7685, 7770 and find support at 7420, 7335, 7250. Nifty continues to remain in short term bearishness and would come out of short term bearishness when it closes above 7575. Strong resistance at 7650 and strong support at 7400 can be expecte