Nifty Stages an Upside Reversal. Read our Stock Tips for today

Today’s Action

Nifty, +8.8%; Sensex, +9%; Nifty Midcap, +5.4%; Nifty Smallcap, +3.7%; Model Portfolio, 0%

Daily Market Review

Market Pulse: Confirmed Uptrend

Nifty gapped up this morning and continued the upward trend as the day progressed and closed 9% higher. As the volume was higher than the previous session, we will mark the move as an additional follow-through day. Last week, we had upgraded the market to a Confirmed Uptrend. However, for a couple of sessions, Nifty closed with significant losses and added one distribution day. Today’s move was strong and constructive but it should be noted that there were some large moves from beaten-down stocks, many of which still appear to be clearly in downtrend. On the sectoral front, Nifty Pharma, Bank, and FMCG closed with a gain of 8–10%.

We continue to be very selective about taking any fresh positions. Nifty is yet to reclaim its 21-DMA (9,020). It is important that investors don’t play all their cards at once. We would suggest adopting an investment approach where you begin with a small allocation and increase it as and when the market advances further. The advance-decline ratio was in favor of advancers. Of 2,133 stocks traded, 1,514 advanced, 331 declined, and the remaining traded flat.

Without trying to predict and decode stories, we will take what the market gives us and continue to monitor unfolding condition. Stocks with higher relative strength and superior fundamentals can do well. Some leading stocks have sharply corrected. Wait for them to put in at least a short period of consolidation and show a constructive breakout from that range. Buying without this period of constructive behavior into a straight upmove off the bottom, puts you at a risk of drawdown.

Key News

Larsen & Toubro won a large contract from the Indian Army to set up an advanced IT-enabled system to operate the Armed Forces Network under the Network of Spectrum (NFS). According to the company, the value of the order ranges between Rs 2,500 crore and Rs 5,000 crore.

Shilpa Medicare Limited received an approval for its anti-cancer drug Imatinib from the U.K. health regulator. The stock was locked in upper circuit of 5%.

Pnb Housing Finance signed an agreement with Japan International Cooperation Agency and Citibank to raise $100M (about Rs 762 crore) for providing loans in the affordable housing segment.

Our current portfolio holding is Nil. Markets were currently not conducive to new positions. Last week recorded a follow-through day, indicating the beginning of a potential uptrend. We may consider adding a few stocks tomorrow.

Buy Watchlist:

Hindustan Unilever, Dabur India, Avenue Supermarts, Dr Reddys Labs. (Nse), Berger Paints India, Deepak Nitrite, and Torrent Pharmaceuticals

-When we add any stock, investors shouldn’t play all their cards at once. We would suggest adopting an investment approach where you begin with a small allocation and increase it as and when the market advances further.

Disclaimer: Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. It is for educational purposes only.

MarketSmith India is an investment advisory product based on William O’Neil’s Can Slim method with model portfolio, pattern recognition, idea lists powered by institutional quality data