Every Rise Will Be Sold! CA Rudramurthy Decodes Why Nifty is Struggling to Stay Positive: Top Picks for Investors
In the past two days, Nifty surged by nearly 1000 points from its lows of around 23,200, leading to optimism in the market. The rally also saw Bank Nifty joining the rally, showing strong movement. However, today, the Nifty closed in the red, halting the two-day upward run due to profit-taking and selling in Adani Group stocks, along with declines in the auto and pharma sectors.
But what lies ahead for the Nifty? According to CA Rudramurthy BV, Managing Director of Vachana Investments, the bullish momentum could be short-lived unless specific levels are crossed. In an exclusive interview with ET Now, Rudramurthy shared his perspective on the market’s future, stating that “every rise will be sold.” Here’s why he’s cautious about the market’s recovery and his top picks for investors.
Nifty Struggling to Maintain Momentum
Over the last couple of days, Nifty staged an impressive recovery, jumping by about 1000 points from its lows of 23,200. Rudramurthy pointed out that Bank Nifty also participated in this rally, but he believes it’s premature to call the market’s bearish trend over. He explained, “I’m very clear that Nifty should cross the 24,550 to 24,600 level for the market to show signs of recovery. Until we cross that level, every rise will be sold into.”
The cautionary tone reflects broader concerns about earnings growth and the market’s reaction to external factors. Rudramurthy highlighted that the rally over the past two days might have given bears more room to sell, creating a potential risk for those looking to enter the market at higher levels. He emphasized that unless the market can break the 24,550 to 24,600 levels, a major recovery may not be on the cards.
Market Volatility: Why Earnings and the Budget Matter
CA Rudramurthy also pointed out that earnings growth for this quarter has been disappointing, which has contributed to the market’s overall uncertainty. With corporate earnings falling short, and with the upcoming budget in February, the market may not see fresh all-time highs unless these key factors improve.
“Earnings have been bad, and until we see a recovery in earnings next quarter and also the budget in February, all-time highs may not come very soon,” Rudramurthy noted. While his outlook is cautious, he didn’t label himself as overly bearish, acknowledging that the market could show some resilience depending on upcoming developments.
Key Levels to Watch for Nifty and Bank Nifty
Rudramurthy stressed that for any recovery to take hold, Nifty must first clear crucial resistance levels. “Nifty has to cross 24,550 to 24,600 for me to say the down move is over and we have fully recovered,” he explained.
Similarly, Bank Nifty needs to break through the 52,600 mark before showing consistent bullish behavior. If these levels hold, it would indicate a potential shift in sentiment and may set the stage for the next leg of the rally.
Sectoral Picks: Where to Invest in India
While CA Rudramurthy remains cautious on the broader market outlook, he remains bullish on specific sectors that are likely to outperform even in these volatile conditions. Based on his analysis, the IT, banking, and FMCG sectors are strong contenders for investment.
IT Sector: A Long-Term Play
Rudramurthy is confident about the IT sector’s potential, even from the current levels. Despite the challenges faced by global markets, IT stocks have shown resilience, and with ongoing digitization trends, this sector is poised for growth. “IT as a sector will do good even from current levels,” he stated.
Banking Sector: Public vs. Private Banks
The banking sector is another area where Rudramurthy sees potential. However, he notes that investors need to choose between private and public banks. Both segments have strong prospects, but the decision depends on individual risk appetites and investment strategies.
“Banks will still definitely do good. It’s a choice whether you want to pick private banks or public banks, and a lot of names are available there,” he said.
FMCG Sector: Valuation Comfort After Correction
Rudramurthy also pointed to the FMCG sector as an attractive investment option, particularly after recent price corrections. Stocks in this sector are now more reasonably priced, providing valuation comfort to investors.
“FMCG stocks have already done enough of correction and now you see some amount of valuation comfort. So, yes, FMCG will definitely do good,” he concluded.
Key Takeaways and Market Outlook
To sum up, CA Rudramurthy’s views on the market can be summarized as follows:
- Cautious Optimism: While there’s potential for a market bounce, Nifty will need to cross key resistance levels of 24,550 to 24,600 to signal a recovery.
- Sectoral Focus: Investors should consider focusing on the IT, banking, and FMCG sectors, which have the potential to outperform.
- Earnings Recovery Crucial: The disappointing earnings growth this quarter will weigh on market sentiment until recovery is visible in future earnings and the upcoming budget.
- Volatility Ahead: Given the uncertainty surrounding the market, investors should brace for continued volatility, particularly with the global economic backdrop.
Conclusion:
As the Nifty index shows signs of struggle, investors must remain vigilant and understand the broader market trends. While the rally may have momentarily boosted sentiment, the lack of earnings growth and the upcoming budget could create further challenges. Sector-specific strategies, particularly in IT, banking, and FMCG, may offer better opportunities for investors looking to navigate the current market volatility.