Buy-the-dip mantra keeps market resilient, experts say bullish grip to stay

Book profits and re-enter at lower levels can be a good strategy say experts

With equity markets witnessing record foreign inflows and US dollar expected to remain weak, buy-the-dip is the mantra being advised by experts. On Wednesday, the benchmark indices dropped 1.5 per cent—their biggest single-day decline since October 15. The decline was immediately bought into, helping the benchmark indices rebound in Thursday’s trade.

Technical analysts believe the markets remain in bullish grip and are poised to make fresh highs.

“Sentiment going into December series is quite bullish. November has seen a record inflow of $7.5 billion from overseas investors. Favourable macro for emerging market equities driving flows are predicated on a weak dollar, which is among the highest consensus trades,” said S Hariharan, head — sales trading, Emkay Global Financial Services.

Ravi Singhal, vice-chairman, GCL Securities, believes if the Nifty crosses 13,088, it could move towards 13,500, provided foreign inflows continue and gross domestic product (GDP) data to be released on Friday meets expectations.

However, with the markets surging 11 per cent this month, some say booking-profits and re-entering at lower levels can be a good strategy.

“It is important to be on the right side of a market trend, it is equally important to book profits at regular intervals and re-enter on dips or corrections,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments. 

“The fear that markets might turn at higher levels and see a sharp fall thereafter forces people to unwind their positions when we have a gap up opening or witness a newer high. This happened on Wednesday when the Nifty corrected over 200 points from the day’s high. While the trend continues to remain positive and the underlying current is fiercely bullish, traders would like to err on the side of caution and book profits at regular slated intervals.”

On closing basis, the Nifty made a high of 13,055 on Tuesday and on intra-day basis, it registered a high of 13,146 a day later. The index had ended October at 11,642.

“Nifty moved up 1,500 points from its recent lows. The index is at overbought levels leading to profit booking after a gap up openings. The index is in a strong uptrend and buys on dip is advisable. A dip of another 200 or 300 points will make it more attractive.  A level of 12,500 is a good level to re-enter the market,” said Aditya Agarwala, Senior Technical Analyst, Yes Securities.

Experts say if Nifty manages to take out its recent highs that could be a bullish signal.

“Technically, for the next two days, 13,070 and 13,150 levels would be major hurdles for the index. If the Nifty50 index crosses 13,150, it could jump to 13,350 levels. However, below 12,930, the index would invite worries in the near term,” believes Shrikant Chouhan, executive vice-president (Equity Technical Research), Kotak Securities.