ANAND JAMES CHIEF MARKET STRATEGIST, GEOJIT FINANCIAL SERVICESWhere we are: The steepest rally since June 2018 is looking quite strong, especially with the FII inflows continuing to be as strong and steady as in the previous month.
A fortnight long consolidation with negative bias unfolded in the early part of April, causing many to claw back bullish expectations, but that consolidation turned out to be a flag pattern, sparking another four-day rally which took out the record peak.What is in store: Despite the strong opening last Thursday, which saw the Nifty at a record peak, investors were cautious going into the long weekend, and with election vibes flowing in.
The close near previous peaks, is not much of a weakening sign, as much an indecision.
A few of the oscillators do show negative divergence on daily charts, but without as much of a confirmation from weekly charts.
There has also been a visible lag from midcaps, which is usually a leading indicator towards bullish exhaustion.
It is also noteworthy that Bank Nifty had not fully shared Niftys enthusiasm last week, and is yet to break out.
Considering all these, the Nifty is likely to move into 2.5 to 3 standard deviations, elevating volatility expectations.
Nifty options have also been equally cautious, with traders happy to play close to the ATM rather than take strong bets.
To this end, 11,660-600 region, appears crucial.What you could do: IT and Pharma sector could be treated with some caution in the initial part of the week.
We are positive on some of the consumer goods, energy and automobile names which are on the way up, having been off the 200 and 100 DMAs.
FMCGs stand to benefit from any positive news flow, as they have been trading in a low expectation scenario of late.