The last week has been a pretty tough one for the Indian Stock Markets. First Barack Obama suprise announcement regarding curb on properitory trading and then, China's tightening norms hit the equities market badly. Indian benchmark indices fell by more than 5% after these announcements. Mid cap and Low cap stocks fell much deeper which indicates that correction is likely to continue.
The much needed correction is now on the cards and will give long term investors enough scope to invest into the Indian markets. The fundamentals remain strengthen, but one needs to remain cautious on the sector / company where one is putting its money. The domestic sectors like paper, media, FMCG, are fundamentally good one and less affected by global factors. Whilst the sectors like Information Technology, Oil, Pharma, should be avoided as these are more closely aligned with international events.
Technically also, NIFTY has break the major support levels. It is below 34 days exponential average which indicates that medium term outlook is not good. The next strong support is seen at 4700-4725 from where the markets can make annother attempt towards 5100.
Option traders can safely take bear spread strategy, buying 5000 Put and sell 4800 Put. One may also safely sell 5300 Nifty Calls Feb and keep 5250 as stop loss to move out of the strategy.
An interesting stock that is worth mentioning is "Valson Industries" It is a textile company with consistent profit records. Also, the company is giving 2.5 Rs dividend every year on Face value of Rs. 10. The stock is currently trading at 25 Rs which indicates dividend of 10% which is always more than bank rates. The stock is only traded in BSE.
