Market volatility calls for selective trading, focus on PSU stocks: Rahul Sharma

The Indian equity market is navigating a tricky phase as the Nifty index hovers around a key support level of 25,650, following three days of positive momentum. After breaking significant resistance levels earlier this week, the market is now consolidating amid mixed sectoral performance.

Rahul Sharma, from JM Financial Services, noted, “As we speak we are actually at a support level. 25,650 is where the support for the Nifty is. It is a cluster of moving averages. The 5, 20, 50-day moving averages are also in close vicinity and my sense is if we do manage to take support for the second half today at this mark, there could be a bounce back in the intraday as well.”

However, he cautioned that the market has faced relentless selling since the morning. “If 25,650 breaks, then it calls for another round of weakness, which means another 100 points can be taken off probably in a day or two. The best thing to do in such a market is to be a day trader, not carry positions overnight. There is a geopolitical scenario brewing with Iran and the US as well, so it could be a fierce reaction once that happens.”

Among sectors, PSU banks are emerging as the preferred play. Sharma highlighted, “What is looking like a hiding ground in this market is PSU banks. They have been doing well, continue to look good on the charts. Punjab National Bank, PNB, is our top pick in this kind of a market. We feel that the stock is ready to move towards targets of 140 on the upside. One can buy PNB at these levels with stop loss placed at 122 and we feel that the overall strength in PSU banks should remain regardless of volatility in the Nifty.”

Sectoral trends today have been uneven, with realty bearing the brunt of selling pressure, down about 2%. FMCG, auto, energy, and finance sectors also faced mild declines. On fresh entries, Sharma said, “If somebody has to take a bet on the sectoral view, then it has to be the public sector enterprises. The PSE space is still pretty much robust. Either one can look to play with the top tier names like NTPC, Power Grid or there is an ETF called the CPSE ETF which can be considered to play on this possible up move in the next few trading sessions.”

He added that the market remains narrow, and investors should exercise caution. “Today, we are seeing it is back to the support levels, maybe another half a percent from here and the risk-reward would become even better. As far as realty is concerned, it has been a struggler any which ways… It is better for Nifty to eventually give us a breakout above 26,400 for the rest of the market to sort of pick up and go in a big way from here. At this point in time be very selective. PSU banks and public sector enterprises are the go-to sectors which are looking good on the long side. If we do sustain below the 25,650 mark on the Nifty in today’s session, there could be another 100-point selloff that we may see in the Nifty index today or tomorrow.”