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Quarterly earnings will give opportunity to realign portfolios

Vikas Jain
Senior Research Analyst, Reliance Securities

Where are We? The Nifty 50 has taken support near the 11100 levels (50 per cent retracement of the previous up-move between 10,700 and 11,700 levels) and witnessed positive momentum with gains of 1.2 per cent w-o-w. Among the sectors, banks and metals gained 1.1 per cent and 1.7 per cent, respectively, for the week, while other sectors remained flat-to-negative in range of 0.5-0.3 per cent. Mid-caps and smallcaps too remained flat-to-negative, underperforming broader markets.

What is in Store? The second quarter results have started and we believe the Index would trade in range of 11100-11500 over the next few weeks and should provide individual stock specific movements with respect to the result announcements. The Bank Nifty can gain positive momentum once it crosses the 200-day average placed at 28800 levels. The Nifty 500 has made higher bottoms on monthly charts in the range of 8,650-8,800 levels which indicates the broader markets are in a sweet spot and any incremental positive news flow from the domestic or global markets would lead the momentum rolling in mid- and small-caps.

What could Investors Do? The quarterly earnings season should give an opportunity to realign portfolios, as the market is pretty skewed with large-caps outperforming and mid-caps and smallcaps failing to move upwards. We believe investors should look at the Nifty Next 50 stocks, as the index is trading down 6 per cent YTD compared to 4.1 per cent YTD positive for Nifty 50. Among the sectors, we prefer to initiate longs in auto, banking and metal spaces for reasonable upsides, while energy stocks can be added in decline as we had a sharp runup of 12 per cent from the recent lows.
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