Flight to Quality

In my note of Thursday I had said that the Dollar Index moving below 80.49 will be another milestone in the the Nifty's path to 6300. The Dollar Index broke below those levels on Thursday and since then has traded much lower.

Another interesting point is that all the Top 10 stocks by weightage in the Nifty members are in a BUY mode as per my way of looking at things. But when I looked at the CNX100 there were quite a few stocks that I would call ripe for "selling". If I am right about this then we could see a few stocks drive the Nifty up while the broad market continues to drift lower. While this is not ideal... maybe it is As Good As It Gets.

Even among the CNXBANK members, I think we will see a halt to the spectacular rally in the PSU mid tier banks. While SBIN, ICICI Bank, HDFC Bank etc will pull the Index up, the IOBs, FBs, IDFCs of the world could diverge and move down or stall. So from my reading it does look like that the overall play in the coming weeks will be more of a flight to safety or if you are an optimist then a flight to Quality if you will with large caps doing well and the small and midcaps stalling. I have a feeling that this could be the case across sectors.

Any market analyst worth his salkt knows that if he sticks his neck out often enough then it is certain to get cut off. So just as a hedge I would like to say that the Nifty should not break below last weeks low of 5970. If we see that happen then the Nifty is most likely to do a retest of 5725 levels. So this entire view of a rally hinges around a stoploss at 5970 levels.