With the Indian stock markets at all time highs, it’s time to be cautious. The Nifty index which tracks the 50 largest companies in India has been on an upswing and the momentum may be tailing off as consolidation looks imminent in the coming weeks.
The index has been moving higher in a consecutive series of all time highs. This consistent surge has made it over-extended on the charts, often referred to as being overbought. What this suggests is that the current momentum may be slowing down and, soon, consolidation may be seen in the markets.
Analysts are suggesting traders to avoid chasing the up-moves at this point. Market experts believe that as the gains become less frequent, and uncertainty lingers, it is best to focus on the fundamentals of stocks and look for better entry points.
Instead of taking a trader’s stance, focus on stocks with a good risk-reward ratio and decent fundamentals, with use of fundamental and technical analysis. This will ensure that traders looking for a long-term investment can find companies that generate good returns, even amidst the uncertainty.
It is a good idea to look at the sectoral performance as well, as stocks may benefit from positive or negative sentiment from relevant industries. This would also be helpful to identify stocks that stand to benefit from government reforms and measures to prop up the economy.
Finally, it is important to be aware that volatile markets are not for the faint-hearted. There is no certainty as to how the markets will move, and at this point, with the Nifty having exhausted its upward momentum, caution is the key.
As it stands, it would be wise to be careful with stock picking and avoid chasing the up-moves. It’s better to wait for more clarity and solid fundamentals as the markets consolidate, and stayinvested in stocks with a long-term perspective.