Historically the month of May has always been volatile for markets but this volatility could be healthy as Nifty seems to have digested the 900-point rally that it saw prior to Karnataka state election results, said Gautam Shah, associate director & technical analyst, JM Financial.
He said, "Market seems to have gotten into a consolidation band of 10400 to 10700 and is likely to stay within that range for a few more sessions."
He said that the brokerage expects Nifty to break out beyond 10,700. "Once that level is broken we could see the levels of 10,900 once again and then maybe towards life-time highs," he said.
“We still have evidence on the charts that this market is headed higher. The series of higher tops and higher bottoms is likely to continue throughout the rest of the year,” he said.
According to him, this consolidation is the foundation of the next big 10 percent move that is likely in next 6-8 months. “Nifty could be closer to 11,800 by the end of this year,” he said.
He said that the brokerage expects sectors like FMCG and IT to lead the rally. "The house is very positive on the FMCG space and one could see another 5-10 percent upside in stocks there, said Shah, adding that they will take the market higher," he said, adding, "IT sector has continued to support the market in the last three months and with every new high the index makes, it seems to pause from time to time, which is an encouraging sign," said Shah.
The CNX IT could go to levels of 15000, a good 1500-point from current levels, he said.
He said that apart from FMCG and IT, banks, auto and capital goods would join the Nifty rally at some point. “The U-shaped recovery in Bank Nifty would take it to 27, 500,” he said. The private sector banks are doing well but there seems to be a ray of hope for the PSU banks as well, he added.
However, JM Financial is not so upbeat on metals and oil & gas.
With regards to crude oil, he said it could stabilise in $62-72 per barrel range, said Shah, adding that it may not be a big worry at least for the next quarter or so.