<b>BULL VIEW</b>: Go long on tech, banks, cap goods

The markets, expectedly, bounced today with the Sensex gaining 282 points to close at  12,697 and the S&P Nifty adding 79 points at 3656.

The BSE IT index zoomed nearly 5% to 4962, and the BSE Bankex advanced over 2% to 6353.

The strong close today is after a fall of nearly 2,340 points for the Sensex and a decline of 670 points for the Nifty from their peaks hit recently. While the Sensex posted an intra-day high of 14,724 on February 9, the S&P Nifty hit its lifetime high of 4247 on February 8.

After the fall, the market was cheaper by 19% from the monthly highs of actively traded stocks. The market value of stocks has been eroded by Rs 7,13,000 crore, and the aggregate price-to-earnings multiple (P/E) of profitable companies had declined to 15.74x from 19.38x. 

Almost 44% stocks are still trading at a P/E of less than 10 when compared with 32% a month ago. The valuation of 66% stocks have declined by more than the average of 19%.

This is likely to encourage bottom-fishing. Analysts, however, caution that bottom- fishing should be done in only counters where there is room for clear upsides or the sector holds promise.

According to analysts, sectors like steel, cement, automobile, real estate, infrastructure, fertiliser and pharmaceuticals seem to have limited upside for the moment.

The technical trend visualised by J M Morgan indicates that there will be a routine pullback in sectors like technology and banking. PSU companies may see minor upside while FMCG and consumer durable stocks will see rebounds from support levels.

Capital goods stocks are likely to outperform but small-cap and mid-cap stocks are far from any meaningful support levels.