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Nifty Corrects Itself Amidst an Uptrend

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In last week’s column (Expect Some Selling Pressure) I wrote about how Nifty will correct in the upcoming week and this is exactly what we saw. The benchmark index Nifty fell about 100 points and the Sensex about 300 points.

This week, the metal and FMCG sectors can expect some important developments.

Metal Stocks
The third e-auction of iron ore in Goa is on May 10, that is a Saturday but speculation will keep this sector in volatile mode starting Wednesday. Before this auction, the state had earlier conducted one on February 17th and March 5th collecting revenue of approximately Rs 261 crore.

FMCG Stocks
FIIs  have reduced their stake in 11 of 16 FMCG firms in the Jan-March quarter. The reduced holdings of FIIs in firms like Dabur, Emami and Colgate however does not indicate a loss of confidence. In my opinion these stocks are still in an uptrend and the demand will return at lower levels and that would be an opportunity to buy with a medium term outlook.

Earning Reports This Week
Monday – Canara Bank, Century Textiles
Tuesday – Gati, HDFC, Titan, Allahabad Bank
Wednesday- Lupin, Syndicate Bank
Thursday- Glenmark Pharma, Union Bank
Friday- Andhra Bank

Markets This Week
The Nifty is currently approaching a soft landing in a major demand area at 6680. However, the market isn’t expected to leapfrog into any significant up or down move this week. It is more likely to fall for the first 3 days and then drift sideways for the rest of it – a common occurrence after a ‘dip in an uptrend’. This action is commonly referred as ‘testing’ in market parlance and takes place to assess if the upmove can sustain its momentum.

I have always maintained that neither fundamental analysis nor price action analysis can ‘predict’ the market. It merely tells us what is going on at a given moment and thereafter it is for the investor  to decide on her or his next move. With context to this week, trading at the support zone of 6680 is expected to start a tussle between the optimistic bulls looking to invest at the ‘dip’ and the opportunistic bears looking to short this already commenced downmove. In my opinion the bulls will carry the day, but such battles can also be quite protracted ones. For small or faint-hearted  investors my advice is, to wait until the upmove commences before investing. I shall be writing about this in next week’s column.

Last Week’s Recommendations
No trade

This Week’s Recommendations
Action: Buy (limit order) at 165, stop loss to be placed at 159.8. Target for this trade is 170.
Timeframe: 4-8 days.

Tata Motors (NSE: Tatamotors)
Action: Buy (limit order) at 419, stop loss to be placed at 412. Target for this trade is 430.
Timeframe: 4-8 days.

Trade Well
•    Until you become an experienced trader, do not risk more than your disposable income.
•    Risk no more than 0.5 - 1 per cent of your capital per trade by adjusting position size to risk.
•    Profit percentages mentioned in the column are before deduction of brokerage, taxes and slippage. That’s because each broker charges at different rates.

Prateek Singh is CEO, MarketScientist