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Is it safe to buy blue-chips at current levels or sell IT stocks now that the rupee is strengthening against the dollar? Is it a good time to book profits in stocks that recently touched 52-week high

As rupee strengthened over the past five sessions investors dumped export-centric safe haven IT and pharmaceutical stocks and instead took to cyclical such as capital goods on hopes of a recovery post elections. While fundamentals of IT companies remain intact, investors have pressed the sell button. Is there is sector churn in process?

Should you buy IT stocks on dips or short-sell lest a trend reversal erode your holdings?  And what stocks to target, if you have to make use of the current in markets? Technical analyst and market expert Devangshu Datta is of the view that it is worthwhile to invest in IT stocks even now and if one has to then following the trend in rupee could make life easier for those invested in IT stocks.

There is an inverse relationship between valuations in IT stocks and rupee’s movement against the dollar.  IT stocks tend to benefit from fall in rupee as the software products of these companies get cheaper and therefore more competitive internationally.
 

Also, it is safe to enter markets now that market trades at its all-time high level. Datta answers whether it's a good time to book profits and get out of stocks that recently hit their 52-week high levels. He says this is not an investor's market and volatility will be high in the run to election results.

Datta also answers what blue-chips present a good investment opportunity with a medium-term perspective.

Below is the full transcript:

Based on the FII trend, what upside one could expect on benchmarks?

It is impossible to predict. The major indices are in new zones with no prior history. We're seeing new records established intra-day on every session.

Is it a good time to short-sell stocks such as Crompton Greaves, Larsen and Toubro and Siemens, which already hit their 52-week-high levels?

No – don't short sell into a strongly bullish market and into a set of stocks which have hit recent highs. Given momentum, good chances that they will beat prior records

What blue-chips would you recommend with short-term investment perspective?

You can trade financials – NBFCs such as IDFC, Rel Capital, LIC Hsg, L&T Finance - going long with stop losses at 2% below entry-pt. This is not a market for an investor – valuations are rising to uncomfortable levels.

How much more upside could be expected out of Bank Nifty?

It has to beat resistance in the 12300 zone. If it does, it could rise till 12600, if it beats resistance in 12550-12600, it could go till 12750, etc. Given that the Nifty, Sensex have both hit record highs, a move till 13,400-plus is not impossible.

What is the time-frame one could stay invested in banking stocks?

All bets in all stocks will need to be reviewed when election results are due. Be prepared for extreme volatility in April-May

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