Markets Likely To Consolidate In Short Term, But Overall Tone Positive: Analysts
India's benchmark stock indices ended on a mixed note on Wednesday.
The markets are likely to consolidate in the short term, but the overall tone is on the positive side, according to analysts.
"Markets have been swinging between ups and downs for a few days, just ahead of the RBI meet. It is taking its own time to consolidate," said Ajit Mishra, senior vice president of research at Religare Broking Ltd.
Barring the banking stocks, the rest of the sectors are witnessing rotational money every alternate day, he said. "We still have multiple resistances to cross; the major hurdle is around 22,150. Until we break this zone decisively, I doubt that there will be any meaningful up-move."
Charts indicate that consolidation is likely to continue in the near future, according to Mishra. But since the tone is on the positive side, one can continue to buy on dips as long as the market is holding above 21,600, he said.
India's benchmark stock indices ended on a mixed note on Wednesday. The NSE Nifty 50 closed 1.10 points, or 0.01%, higher at 21,930.50, while the S&P BSE Sensex ended 34.09 points, or 0.05%, lower at 72,152.00.
Losses in shares of index heavyweights Infosys Ltd. and HDFC Bank Ltd. weighed on the indices, while gains in State Bank of India and Reliance Industries Ltd. supported them.
On intraday and daily charts, the market is still holding a higher bottom formation, which supports a further uptrend from the current levels, said Shrikant Chouhan, head of equity research at Kotak Securities Ltd.
"For day traders now, 21,850 would act as a key support level. Above the same, the market could rally till 22,100-22,150. On the flip side, below 21,850, we could see one quick intraday correction till 21,800," said Chouhan.
There is still some scope for improvement in public sector banks, according to Avinash Goraskshakar, director of research at Profitmart Securities Pvt. The banking system and the PSU banks over the last 5–10 years have completely transformed, he said.
"There is a large amount of scope to get to further rerating because this pocket has remained a little subdued when compared with other sectors, which have outperformed," Goraskshakar said, adding that he is also positive on real estate stocks.
PSU banks are on a different trajectory, with the index marking new record highs, but are now slightly overheated, according to Mishra.
"Investors will keep an eye on the Reserve Bank of India's Monetary Policy Committee decision on interest rates tomorrow. Several developments have unfolded in recent weeks that could shape the verdict," said Avdhut Bagkar, technical and derivatives analyst at StoxBox.
