Is it time to book profit? Here's what analysts have to say

Bulls continued to remain on the front foot last week as positive global markets aided sentiments in the domestic bourses. The benchmark BSE Sensex touched a new high to close above the 58,000-mark, while the NSE Nifty index sustained above the psychological 17,000 level. Technically, the index formed a strong bullish candle on weekly charts which is broadly positive. Going ahead, market analysts believe that investors should stay cautious as valuations have turned over-stretched amid the ongoing rally. On the other hand, some believe that quality themes are clearly back in focus as the market is slowly shifting focus towards sustainability of the returns.

Here’s what analysts have to say:

VK Vijayakumar, chief investment strategist, Geojit Financial Services
We know from experience that markets can surprise – both on the upside and downside. Greed and fear can cause overreaction on the upside and downside. From the valuation perspective, now we are in the overvalued zone but excesses can sustain in a ferocious bull market like the present one. So the only option before long-term investors is to remain invested and occasionally book some profits and move money to safe fixed-income assets. It is possible that by the end of this financial year Nifty may be around the present level or lower than that.

Shrikant Chouhan, executive vice president, equity technical research, Kotak Securities
On daily and intraday charts, it also maintains a breakout continuation formation indicating further uptrend from current levels. While the short-term trend remains positive, some profit booking could be in the offing as traders may prefer to book some profits near the 17,500 resistance level. For the trend following traders, 17,150 and 17,000 could be the important support level while on the flip side, 17,500 and 17,700 could act as an important resistance level for the market. In the meantime, on weekly charts, the Bank Nifty has formed a range breakout formation, suggesting further upside if the index succeeds to trade above 36,000.

Neeraj Chadawar, head-quantitative equity research, Axis Securities
Large caps have been playing a catch-up rally for the past one month, which is driving the benchmark to higher levels. We believe that the style rotation holds the key, moving forwards. We are in a very interesting phase of the market where benchmark indices are touching to all-time high levels in which the market positioning has slowly shifted towards high-quality largecap names. The market breadth has narrowed in the last one month and the high-quality large cap stocks outperformed the broader market. A quality theme is clearly back in focus as we had highlighted this in the last month also where the market focus was slowly shifting towards the sustainability of the returns. We continue to see the broader market doing well, as the visibility on broad-based earnings is still intact. Quality is an emerging theme that is now visible in the performance of the FMCG index. Allocations are now increasingly shifting towards quality stocks where the earnings visibility and the balance sheet strength are very high.

Joseph Thomas, head of research, Emkay Wealth Management
Sensex has gone past 58,000 to close the day at 58,128, and the Nifty too comfortably rose to 17,323. The rise was witnessed across market caps and sectors, though the uptick in midcaps and small caps was a bit muted. The improving general pandemic conditions, the GDP number indicating a continuing revival in economic activity, the increased confidence in facing a potential third wave, the stress on universal vaccination, and finally, the indications from Jackson Hole address by the Fed Chief that tapering off may start as early as later this year but rate hikes may happen much later next year, are the factors which supported the rally in the markets. The developments around the US economy, the revival of activity in Europe – both in the face of rising numbers of fresh infections -would also be factors that would matter in the coming week.