Buy, Sell Or Remain In Cash?

At the risk of sounding repetitive, we would like to reiterate that these are short-term trend weaknesses that we are observing. The long-term positive trend remains intact.

We have selected the top two and the bottom two sectors in the current market scenario that stand out as positives and negatives.

Strong Sectors

1.  The sector that we think will do well in challenging market conditions is Auto. The Auto sector has broken out of a more than the two-year base. While it did join the party a little late, the late sector rotation means that the Auto sector can continue with its positive move even as other sectors witness a pause or correction.

Click on chart to enlarge view.

On a relative basis too, the index is outperforming other sectors. The Auto sector has broken out above its resistance and is expected to continue its outperformance.

2. The next sector we're looking at is the Consumption space. Price has moved above a Fibonacci extension and is holding its ground. There is an overlap between the constituents of the Consumption and the FMCG sector. Thus, we see the defensive characteristics of the FMCG sector even in the Consumption themed index. Consumption stands out as a stronger contender than FMCG, hence the selection.

On a relative basis too, we can see the strength in Consumption.

Weak Sectors

1. The first sector here is Private Banks. The banking sector as a whole has been under pressure last week. The Nifty Private Bank index has turned away from resistance while displaying a bearish momentum divergence.

On a relative basis, Nifty Private Bank has hit resistance and breached its immediate level of support. So it may be headed lower going forward.

2. The next sector that we'd like to stay away from is CPSE. Despite making a good bull run over the last few months, the index was one of the first to confirm a bearish momentum divergence. The weakening sentiment continues to play out in this sector and we'd like to stay away from this space.

This was a round-up of the sectors that we like and do not like over the short-term. Make sure to follow your risk management levels diligently.

These are sectors to shift your capital into or out of only if it's imperative for you to remain invested in the market. There is no harm in cashing out and waiting for the right price to buy stocks again. That is a personal choice. We are here to share our analysis with you so that you can make the most of the market!

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team