Go for IT, pharma stocks selectively

Last week, the major indices managed close higher on weekly basis despite the rupee falling to a life time low and escalating trade war tensions. After making new lifetime high of 11,760.20, the Nifty pared some gains and closed 1.1 per cent up for the week.

The BSE Sensex closed at 38,645, up by 393 points or 1 per cent. As mentioned earlier, pharma and IT counters continue to be the outperformers in the market. BFSI sector stocks are lagging. the leading bank Nifty is unable to make a new high, trading in the range in last three weeks. But Midcap-100 and SmallCap-100 indices gained 2 per cent.

Last week, the price action, after the first two days of a sharp rise and profit booking at in last three days, created a small upper shadow candle which resembles a shooting star. For the past six weeks, Nifty gained more than 800 points or seven per cent.

As there is no weakness in the price trend in any time frame, we can only ride the trend as long as it does not make a lower low. Since June 2018, Nifty has maintained rhythm of not correcting for more than two to three trading sessions in a row.

The 11,600 would be a key level to watch out for in the next week as holding above the same would keep positive options open. Any kind of consolidation will make a higher base for Nifty. The Nifty is moving in the perfect narrow upward channel, supports in channel placed at 11,600. The targets are at 11,925, which is also a 161.8 per cent Fibonacci extension level.

The macroeconomic indicators are not so encouraging at the current juncture, with falling rupee, rising crude prices, CAD, high price earnings ratio and other parameters. With this background, one should approach the market with cautiously optimistic note. As we said earlier, be positive in pharma, IT and consumptions space selectively. – Hans Research Team