Gautam Shahs Bets That Can Cushion Investors During Current Pullback

While the pullback in stocks in the last month and a half has priced in uncertainties, there is no reason for the benchmark Nifty 50 to bounce back and rally, according to technical analyst Gautam Shah.

For the benchmark, 16,700 is a key support area, according to Shah, the founder of Goldilocks Premium Research. If that’s broken, the index can slip to the 16,000 levels, from where the breakout happened, he said.

An economic recovery aided by government spending, formalisation and easing Covid concerns propelled Nifty 50 to new records this year. The benchmark, however, has fallen 8% since its last peak on Oct. 18 on worries that valuations are pricey. Concerns around the Omicron variant of the virus added to uncertainty since last week.

The real issue for the market is that the two heavyweight sectors—banking and information technology—are looking weak, and telecom leadership alone cannot take the markets higher, Shah said. He sees more downside for small and mid caps, and if there is any hiding place, it’s in large caps, and in particular the telecom twins of Reliance Industries Ltd. and Bharti Airtel Ltd.