Dalal Street Corner: Metal, banking stocks help market snap 3-day losing streak; what should investors do?

Metal and banking stocks led from the front as the stock market snapped a three-day losing streak to end in the green on monthly derivative expiry day on Thursday. It was also the first occasion when the market closed with gains this week. Benchmarks Nifty50 and the Sensex gained 0.9% and 0.94% respectively as headline indices settled at 16,170.15 and 54,252.53 on Thursday.

"On monthly expiry day, the index finally managed to close in the green after three days of losing streak," said Palak Kothari, Research Associate, Choice Broking.

Led by State Bank of India, Nifty PSU Bank closed higher by 3.16% as HDFC Bank, Axis Bank and ICICI Bank also led the recovery from the front. As for Metal, Tata Steel drove the rally in Nifty Metal, which ended higher by 2.6% on Thursday, with over 5% gain. JSW Steel was another top gainer on the index. 

Meanwhile, Nifty FMCG was the only index that settled with some cuts on Thursday.  

However, foreign institutional investors continued with their selling spree as they offloaded shares worth Rs 1,803.06 crore on Wednesday.  

As the market continues to exhibit extreme level of volatility, we have collated views of experts who read into today's trend and provide insight into the future trend.

Vinod Nair, Head of Research at Geojit Financial Services.

After the heavy sell-off market showed signs of exhaustion and could bounce for the short to medium-term. Technically, the broad market is in the oversold territory and fundamentally valuations are just below the three-year average. A key reason for the current correction is selling by FIIs and a reduction in domestic buying. 

A drop in FIIs selling will be an important reason for the bounce. For this, the actions to be undertaken by FED and RBI in June will be an important factor. Moreover, we should note that the fiscal measure announced by the Indian government to control inflation is positive for the domestic market"

Ajit Mishra, VP - Research, Religare Broking Ltd

Markets traded volatile on the monthly derivatives expiry day and gained over a percent, taking a breather after the recent dip. The tone was negative in the first half, however, a sharp recovery in the select index majors not only pared losses but also pushed the index higher. 

We’re seeing respite in line with the global counterparts but participants shouldn’t read much into a single-day rebound. The buoyancy in the banking pack is certainly encouraging, however, Nifty needs a decisive break above 16,400 for any sustained recovery. 

Keeping in mind the overnight risk and intraday volatility, participants should limit leveraged positions. Investors, on the other hand, can start nibbling as quality stocks are available at a good bargain.

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribhas

The Nifty, after a positive start, stumbled near its key hourly moving averages & slipped below 16000-mark in the initial trade. It went down to test 78.6% retracement of the recent leg of the pullback, which was near 15900. 

The key Fibonacci level induced the bulls into action. Consequently, the index had a sharp reversal thereon with which it surpassed the key hourly moving averages as well as upper end of a reverse falling channel on a closing basis. 

The Nifty is now set to test the hurdle of 16400 once again, which will be the key level to monitor on a closing basis. The Bank Nifty has given a strong breakout on the upside today & is expected to continue to outperform going ahead.
 

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services

There are indications of the market stabilising and consolidating around current levels. For the Indian economy, elevated crude prices will continue to be a major headwind and sustained FPI selling, which can be expected to continue, will be a major obstacle in the market rally.  

The market trend continues to be uncertain and, therefore, what investors can do now is to buy high quality stocks for the medium to long-term. Financials, particularly leading banks, are good buys for the medium to long-term.