According to technical analyst Salil Sharma midcaps still have got some steam left. There some midcap stories, he says, where he says there is value and can provide good buying opportunities.
However, Sharma is cautious about cement stocks, which he refuses to back at the moment.
Excerpts from CNBC-TV18's exclusive interview with Salil Sharma:
The kind of recovery that we have seen, does that give you any kind of consolation?
It gives some consolation because we did test the support at 3430, which is very critical according to us. Below that, today 3410 was also touched on an intra day basis.
For me, that would be a critical level. We can close above 3430. The next resistance now is at 3470. Do we scale that or close below that is also very critical.
How much steam do you think is left in these markets? Are we moving towards a fairly valued zone or is this the correction that could actually deepen?
I would be more in favour of the correction deepening because we could have one or two days of upside, which would be capped first at 3470 and then at 3505.
In any case 3580 would be a very formidable, which is still quite far away from the high of 3775, which we touched earlier. We could be making a lower top there. If we go below 3390, we would be making a lower bottom, which would be bad and could signal a trend reversal.
The twenty-day moving average has been breached this time. In this bull run, which one has seen for the past twelve months, we breached a twenty-day moving average once in September last year and that too for a very short while.
We are also closed to the 50 DMA (Daily moving average), which is at 3393. If that is breached that would be the first time in this rally that the 50 DMA is breached. We are close to a number of critical levels, which need to be watched.
What do you think of the midcap and smallcap space?
According to us, midcap does have some value left in it. As far the sentiment is concerned, technically they generally do worst than the larger caps. In that sense, technically, may be it is not a good idea to buy midcaps. But there are some good midcap stories, where there is value. Fundamentally, they offer a good buying opportunity.
What about the stocks that are surviving at this point in time? If we look at the Nifty, we have had the cement pack doing very well. We had some of the FMCG boys recovering as well. Could those be considered pockets of strength or is that merely a sectoral preference that we are seeing from the market?
I think the former is just a kind of flash in the pan or rather pull back. Cement did see a very sharp downswing.
If one looks at the ACC charts, it is one of the first major shares, which has formed a lower top and lower bottom and is looking particularly weak. On the upside, ACC has a very strong resistance between Rs 905-910. The next level between Rs 950-952 is far away from the high made at Rs 1080. Cement I would not be backing at the moment.
FMCG is always a good defensive play. One is talking about recovery in Hindustan Lever. It did go to its low of Rs 260-262 support zone from where it recovered. But it could fade between Rs 260-280 in the days to come.
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