“We expect broader markets to accelerate upward momentum, fuelled by 18 month’s consolidation breakout in the midcap index. Hence, dips should be capitalised on to build a portfolio from a medium-term perspective,” a report by ICICI Direct recommended.
From Thursday’s closing price of 18,488, the 50-stock index is just 400 points or 2% away from the all-time high. The current exuberance in the domestic stock markets is on the back of foreign institutional investors (FIIs) returning back to their buying ways.
“We expect the index to resolve out of the intermediate hurdle of 18,500 and challenge the lifetime high of 18,900 in the coming month,” the ICICI Securities report said. On the downside, Nifty50 is unlikely to breach the key support threshold of 17,800, it added.
In its March report, brokerage ICICI Securities recommended a buy-on-dips strategy, which has “fared well” according to the claims made by the brokerage firm in its June report.
Broader markets will not be without action and midcap stocks will likely give opportunities to investors to make some moolah.
ETMarkets.comICICI Direct has also identified themes and specific midcap stocks which can earn investors handsome gains.5 Reasons why midcap will ride an uptrend:
1) Consolidation breakout confirms resumption of uptrend: Breakout from the past four week’s consolidation of 18,500-18,000 bodes well for the acceleration of uptrend.
2) Midcaps to maintain relative outperformance: The Nifty midcap index witnessed a faster pace of retracement as it retraced past four month’s decline in just two months and approached near its all-time high.
3) The ratio line of Nifty Midcap/Nifty500 has recorded breakout from cup and handle pattern after five years, indicating acceleration of upward momentum in the broader market.
4) Improving market breadth displays broad-based participation: The recent consolidation is on the back of improving market breadth as currently 60% of the stocks of the Nifty500 universe are trading above 200-day SMA compared to April end reading of 48%, highlighting broader market participation.
5) Constant buying spree of FIIs: FIIs inflows have remained sturdy in May at Rs 25,000 crore, which is a key supporting factor for the acceleration of the structural uptrend ahead.
Themes and Stocks to buy
1) PSU – National Aluminium Company
2) Capital Goods – Elgi Equipments, Tega Industries
3) Auto – JK Tyre, Mahindra CIE Automotive
4) Telecom & IT – Birlasoft
5) Pharma & Chemicals – Laurus Labs
6) Infra, Real Estate, Metal – Brigade Enterprises, PNC Infra, NCC
7) Others – Shoppers Stop, TCI, IRCON, Lemon Tree Hotels, Tejas Networks
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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