The stock market, which was in a proven uptrend a few months ago, changed to an uptrend-under-pressure mode before switching to a downtrend mode, sending Nifty bulls on a roller coaster trip. Bulls bought the dip as if it were genetically pre-programmed for them to do so, and Nifty is currently back in a rally-attempt phase after hitting a 52-week low at 15,183 last week. However, technical indications have not yet indicated that the Nifty has reached a bottom.
“When the market direction changes, it is crucial to keep your watchlist ready and act accordingly. A great way to find worthy watchlist choices is to focus on stocks that hold up well during the correction,” financial services firm William O'Neil India said in a note to investors.
It suggests investors to find stocks with higher Relative Strength Ratings. “You would also want your stocks to hail from leading groups, so insist on a solid Group Rank. Fundamental strength should also play a vital role. Remember, you're looking for the very best the market has to offer. That means finding stocks with good quarterly sales and profit growth. EPS Rank will help you here,” it said.
Their data reveals that, in the last five weeks, the RS Ratings of top bank stocks with significant Nifty weighting have increased, which is a promising sign. Last week, the RS Ratings of IT stocks also increased.
If Nifty rebounds from here, these sectors might be the prospective market leaders, according to the research. In contrast, the RS Ratings of metal companies, which have been under pressure as a result of declining commodity prices, are extremely low and don't seem to be getting any better.
“Without trying to predict and decode stories, we will take what the market gives and continue to monitor the unfolding conditions. Stocks that are breaking out of their bases, with higher relative strength and superior fundamentals, can do well,” William O'Neil India said.
In the past month, Nifty and Nifty IT both had declines of 2.64 percent, while Nifty Bank experienced a decline of 1.93 percent. As the metal index has fallen 11.27 percent in a month, metal stocks have been the greatest wealth destroyers. On the other hand, the pharmaceutical index has seen a 4% decline in value.