Nifty could face a strong resistance near all-time highs.
(Image: Reuters)

The Nifty 50 has rebounded smartly from the lows of the previous week and is now scaling fresh all-time highs. However, the Relative Strength Index (RSI) has still not improved for the index, said Rahul Sharma, Director & Head – Research, JM Financial in an interview with Kshitij Bhargava of Financial Express Online. Further, he adds that Nifty could face a strong resistance near all-time highs and believes that the FMCG space remains the best bet for investors, given the elevated levels of Nifty. The benchmark indices had corrected from the highs last week amid a global sell-off. 

Do you still see a correction taking Nifty closer to 15,900?

The recent bounce-back in the global markets have taken Nifty away from harm’s way as support of 16,400 remained intact on a closing basis. However, RSI has still not improved for Nifty as compared to the August 18 high and we may see supply coming again at higher levels. The good thing about yesterday’s move was an improvement in market breadth which has helped Nifty record a close above 16,600 (a new ATH closing). The confirmation of correction will come if we break 16,400 decisively until then it’s best to stick to momentum counters for trading and investors are advised to take some profits off the table as we inch higher. 

If last week’s negative trend has been reversed what level could the Nifty scale in the near term? 

We are approaching monthly expiry and monthly closing which should set the trend for a lot of sectors that have started to witness rotation. Since we are in uncharted territory it’s best to take one move at a time and keep stop-losses on longs. Nifty may attempt to test the 16,700-16,800 zone on the upside which remains a strong resistance area as per options data. 

What levels should investors watch on the downside? 

Below 16,400 the bearish move would get activated once again. 

What sectors seem attractive at this juncture?

FMCG looks the best bet as of now given the elevated levels in Nifty whereas IT may see good trading momentum continue. We are looking for signs of follow-up buying while identifying sectors. 

Midcap and smallcap stocks jumped today, is the trend reversing for them and could we see them surge higher or is it too early to say? 

It’s a bit early I would say since they are due for a time correction. It is best to stick to quality names in Mid-caps and Small-caps and avoid pre-empting bounce back trades here.