After a sharp rally of more than 1000 points in the Nifty, investors are now facing a key question: should they continue buying at current levels or wait for a correction? According to technical market expert Rudra Murthy, caution may be the better approach at this stage.
Speaking to ET Now, Murthy said that while he remains positive on the broader market outlook, the risk-reward equation for fresh buying in benchmark indices is no longer favourable after the recent surge.
Nifty Near Resistance Zone
Murthy recalled that he had turned bullish when the Nifty witnessed a gap-down opening around the 23000 mark last week, expecting a rally of nearly 1000 points. With that target largely achieved, he believes traders should now be selective.
He identified the 23800 level as an important support zone for the Nifty, while 24300 remains the immediate resistance. Since the index is currently trading between these levels, he feels there is limited upside for fresh long positions.
According to him, traders entering at current levels may not receive adequate compensation for the risk they are taking, especially after such a strong rally in a short period.
Bank Nifty Showing Signs of Underperformance
Murthy also pointed out that Bank Nifty has started lagging behind the Nifty over the past few sessions. He expects the banking index to find support around 57000, while 58000 could act as a near-term resistance level.
While positive global and geopolitical developments could trigger a gap-up opening at the start of next week, he expects some profit booking to emerge after that initial strength.
Instead of chasing the rally, he advised traders to use any meaningful correction as an opportunity to build fresh long positions.
Avoiding IT Stocks Despite Sharp CorrectionThe recent sell-off in information technology stocks following weak cues from Accenture has sparked debate over whether the sector has become attractive from a valuation perspective. However, Murthy remains unconvinced.
He said investors have been calling IT stocks cheap for a long time, yet many have continued to underperform. According to him, the sector is facing structural challenges as artificial intelligence reshapes business models and revenue streams.
Murthy said he would rather wait for greater clarity and stronger technical confirmation before entering IT stocks, even if it means buying at higher levels later. For now, he considers IT the sector to avoid.
Top Stock Picks
Among individual stocks, Murthy highlighted NBCC as one of his preferred ideas. He noted that the stock has formed a rounding-bottom pattern, taken support around the Rs 100-Rs 105 zone, and recently witnessed a breakout above Rs 110. Strong delivery volumes and positive derivatives positioning further strengthen the setup, he said.
He expects NBCC to initially move towards Rs 135 and Rs 150, with the possibility of higher targets over the longer term. He suggested maintaining a stop loss at Rs 105 on a closing basis.
Another stock on his radar is Eternal. According to Murthy, the stock has undergone an extended consolidation phase and established a strong base between Rs 230 and Rs 240. A sustained move above Rs 260 could pave the way for targets of Rs 285 and Rs 300. He recommended a stop loss at Rs 245.
Buy on Dips, Not at Current Levels
Summing up his market view, Murthy said investors who have benefited from the recent Nifty rally should consider booking partial profits. While he is not bearish on equities, he believes the better strategy is to wait for declines rather than initiate fresh long positions immediately.
His advice for traders remains simple: stay stock-specific, protect gains and use market corrections as buying opportunities instead of chasing prices higher.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions)
