Decline In FIIs' Long Positions Can Lead To Time-Wise Correction, Says Analyst
The benchmark stock indices ended higher for the second consecutive session on Monday.
Indian equities can go through further corrections in the coming sessions as long positions of overseas investors have declined to 35% and there are no signs of short-covering yet, according to Ruchit Jain of 5Paisa Ltd. The NSE Nifty 50 has been in oversold territory till Friday due to a sharp downturn in the preceding six sessions. The gains on Monday raise the question of whether it is an uptrend or a pullback move, the lead research analyst told NDTV Profit.
"Before the start of the correction, (the) FIIs had about 57–58% positions on the long side, but they have formed very aggressive short positions in the last one week. Long positions have declined to 35% now," he said.
Jain said that there are no signs of short-covering yet and this could lead to further corrections. "It would be a time-wise and not price-wise correction."
The benchmark stock indices ended higher for the second consecutive session on Monday, with the Nifty closing 0.86% higher at 22,336.40 and the S&P BSE Sensex gaining 0.77% to end at 73,648.62.
Jain also pointed out that the small-cap index has not corrected as much as the benchmark, indicating a window for making good stock-specific trades.
He has a buy call on Hindustan Unilever Ltd., citing a favourable risk-reward ratio with a target of Rs 2,380 apiece and a stop loss at Rs 2,150; as well as Raymond Ltd. with a target of Rs 2,300 and stop loss of Rs 1,930 per share.
The market will be looking at how Vodafone Idea Ltd. uses its proceeds from the Rs 18,000-crore FPO on network expansion, 5G introduction and subscriber growth, according to market analyst Mahantesh Sabard.
He said the company had been able to improve its financial position and the telecom sector at large is benefiting due to a rise in the average revenue per user and 5G expansion, which will further lead to a jump in the key metric. "Equity dilution does not matter in the interim; if the equity infusion helps support the balance sheet, so be it."
Watch The Conversation Here
Disclaimer: The views and opinions expressed by the investment advisers on NDTV Profit are of their own and not of NDTV Profit. NDTV Profit advises users to consult with their own financial or investment adviser before taking any investment decision.