By Sudhakar Pattabiraman(Head Research operations, WILLIAM ONEIL INDIA)Where are we: Broader market indices faced intense selling pressure once again, with the Nifty Smallcap posting losses for the eighth time in the last nine weeks.
The overall market continues to be divergent with leading indices trading 2-3 per cent below their all-time highs while midcap and smallcap benchmarks have corrected 15 per cent and 23 per cent, respectively.What is in store: While the Nifty is just 3 per cent below its all-time high, the index is finding it hard to retake its previous high of 10,929 amid persistent foreign institutional selling.
However, the index has managed to trade constructively along its strong support of 10-week moving average.
With the OPEC nations agreeing to an increase in oil production, the market sentiment could see an improvement from here on.
That said, until we see a decisive breakout by the Nifty above 10,930 levels, the range-bound kind of trade could continue.
On the downside, 10,550 and 10,400 serve as crucial support levels.What could investors do: Since we are yet to see a clear trend emerge on the upside, investors should restrict themselves to quality companies in the large-cap space.
These would be the ones that have strong business models allowing them to deliver solid growth rates quarter-after-quarter and year-after-year.
Such companies generally have strong doubledigit sales and earnings growth, high return on equity and rising institutional sponsorship.
While the overall market remains range-bound, quality stocks from the financials and consumption segments have done well in recent times.
Some of the fundamentally solid names that continue to display strength are Bajaj Finance and Page Industries.