Tea sector spreads the aroma

The indices bounced back in the last week after they dropped into an intermediate downtrend as the Sensex and the Nifty are now closer to their all time highs and the earlier intermediate tops of 20,238 and 6,012 respectively. The activity clearly shifted to the mid-cap stocks as the CNX Mid Cap index zoomed past its earlier intermediate top and made it into the new high indicating that now investors and traders will have to look at the mid-cap and small-cap stocks as these stocks have now started to outperform the large cap indices. The mid-cap stocks were lagging since the past one year and investors are now seeing good valuations in many of these stocks as compared to the large cap stocks.

Investors and traders must remain flexible and get into the stocks and sectors which outperform the indices. In this way they will get excellent returns. In the last week I had discussed about the refinery sector as stocks in this sector had started to outperform. We saw the result of this in the last week. Now as the activity has shifted to the mid-cap and small-cap stocks, and it could be time to get into these stocks. However remember, these stocks are high beta stocks and they will rise vertically higher and also fall vertically. Thus, keep a strict trailing stop.

In the last week, the Sensex and the Nifty came close to their all time highs, but have now paused for some breath, before returning on journey for new highs. The Sensex gained 4.18% and the Nifty gained 4.30% in the last week, as against a 7.62% gain recorded by the CNX Mid-Cap 100. Among the sectors, the BSE FMCG Index was the largest gainer ending 11.16% higher and was followed by the BSE Bankex which gained 7.75%. On the losing side, the BSE IT sector continued to be the weakest sector ending 2.21% lower and was followed by the BSE Healthcare index which registered a marginal gain of 0.74%. The targets for the Sensex and the Nifty to go into a fresh intermediate uptrend are at 19,988 and 5,967 respectively. The CNX Mid-Cap index has already moved into the new high territory and is in an intermediate uptrend and will have to drop below 7,178 to drop into a fresh intermediate downtrend. If frontline pivotals remain subdued, it is quite likely that the Sensex and the Nifty