Street signs: 'Buy the dip' say chartists, rising free-float trade and more

‘Buy the dip’ say chartists

The commentary by technical analysts has moved from ‘sell on rallies’ to ‘buy the dips’, with most expecting the bullish momentum, seen over the past three weeks, to sustain. The benchmark Nifty has rallied 15 per cent from 8,823 on May 18 to 10,142 on June 5. “Technically, the Nifty is heading for the levels of 10,300 and 10,500, if it crosses 10,180. Until then, the Nifty may consolidate between 10,180 and 9,850. The strategy should be to buy the dips,” says Shrikant Chouhan, executive vice president, equity technical research, Kotak Securities.

Samie Modak

Gold finance firms on investor radar

Shares of gold finance companies Muthoot Finance and Manappuram have seen high investor interest in the past fortnight. The stocks have rallied sharply on buzz that the Reserve Bank of India (RBI) is planning to relax the loan-to-value (LTV) ratio for gold loan from the current 75 per cent to 85 per cent. The LTV ratio refers to the amount of credit borrowers can get against gold as collateral. Further, the sharp spike in the gold price has given impetus to these stocks. “If the risk-on trade continues, we expect gold finance companies to gain more from current levels given their relatively de-risked business model and declining cost of funds,” said an analyst.

Sundar Sethuraman

 

Rising free-float trade

Market players are of the view that companies where promoters have cut their stakes can be good buys. The rationale being an increase in free-float will lead to higher weighting in global and domestic indices. Bharti Airtel, Kotak Mahindra Bank, and HDFC Life Insurance are some of the companies that have seen a reduction in promoter holdings in recent weeks. “Already, global index providers have taken cognizance of the issue and soon the higher weighting will come into effect. This will result in passive inflows. Given the bullish environment and increased overseas investor participation, one can look to buy these blue chip stocks,” said a market expert.

Samie Modak