Markets Wipe Out Monthly Loss; Experts See Next Stop on the Nifty at 8,900
The Sensex and the Nifty gained 1.6%, most since Jul 11, back to their Apr 2015 highs.
Indian shares extended their gains on Tuesday, following a rally in U.S. equities, helping the benchmarks wipe out a monthly loss.
It was like the calm before the storm, Ashu Madan, chief operating officer at Religare Securities told BloombergQuint in a phone interview.
Trading has been light in August, with volumes down in double-digit percentages from mean levels amid confusion about U.S. Federal Reserve policy and the outlook on foreign fund flows.
Expectations for a U.S. rate increase this year surged over the past two weeks, prompting global funds to pull out money from Indian equities in three of the past four sessions.
“Everyone was waiting for the correction and then to buy. But now there is a feeling of missing out; plus, since the market was not going anywhere – twice there was failed attempt to cross 8,700 – people thought that closer to 8,700 is a good shorting opportunity,” he says.
The S&P BSE Sensex gained 1.6 percent to 28,343 at the close in Mumbai; while the Nifty also climbed 1.6 percent to 8,744, most since July 11. Both the indices are at their highest level since April 15, 2015.
The market breadth was encouraging at 1,009 advances, 576 declines and 270 stocks remaining unchanged. Barring the S&P BSE Telecom index, all other 18 sectoral gauges advanced on the exchange.
Nifty has given a decisive move today, breaking out from the upper band of the trading channel, says Hadrien Mendonca, senior analyst at IIFL. If the current momentum sustains, he expects the Nifty to eventually move towards the 8950 level, with immediate resistance seen around the 8850-mark. This is also the April 2015 high for the index.
He says the next leg of the rally will be led by the Nifty Bank index, which touched a new 52-week high. “We expect Nifty Bank to make a move towards the 20,200 levels in the near term,” he writes in an email.
For Madan, who also sees Nifty at 8900 as early as next month, the strategy is clear: Go Long. “Cement is our big pick. But we expect laggards like pharma and information technology to play catch up with the leaders,” he says.
On the flipside, telecom remains an avoid, says Madan citing the ongoing tariff wars. “If at all one wants to trade, they can go short on Bharti Airtel,” he says.