Nifty takes out 16,600 in record-breaking run but some analysts turn cautious

“The recent surge in the index lacks decisiveness due to prevailing underperformance from the banking pack, which holds considerable weightage. Besides, the continuous profit taking in the broader indices is also keeping the participants on the edge. Considering the scenario, it’s prudent to limit naked leveraged positions and maintain caution in the selection of stocks,” said Ajit Mishra, VP – Research, Religare Broking Ltd.

The Nifty IT index jumped 2.5% led by strong gains in Tech Mahindra, Infosys, TCS and MindTree. The IT sector has supported the current leg of market rally, buoyed by positive earnings announcements and its lower exposure to the effects of COVID-19.

Also, aiding sentiment, India recorded a sharp decline in daily new COVID-19 infections fell to lowest since March 16, while it administered more than 88 lakh doses of vaccines in the past 24 hours.

Deepak Jasani, Head of Retail Research, HDFC Securities, said: “Nifty recovered smartly today from the intra-day lows, but the broader market is yet to bounce up. Sector rotation is being seen with IT and FMCG rising while metals and telecom undergoing correction. Nifty could continue to rise gradually but the broader markets could take time to complete their correction.”

However, losses in metal and banking stocks capped the gains. Metals fell 2.30%, with Vedanta, Welspun Corp and NMDC among top losers.

Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments, said: “The index successfully achieved its target of 16600. If we can keep above this, the next level should be 16850. Profit booking sessions cannot be ruled out. Since the overall trend is positive, traders can utilize intra day corrections to accumulate long positions for higher targets.”

Shrikant Chouhan, Executive Vice President, Equity Technical Research, Kotak Securities, said: “Markets maintained their upward trajectory thanks to a sharp rally in IT stocks, as investors bet on recovery on the back of states relaxing lockdowns and opening up their economies. On daily charts, Nifty has formed a breakout continuation formation even as intraday charts suggest traders may prefer to take some profits near the 16700 resistance level. As long as Nifty trades above 16520, the uptrend formation could continue up to 16675-16720 levels. On the flip side, trading below 16520 could trigger a quicker intraday correction up to 16460-16410 levels.”