Gautam Shah says Nifty rally not done yet, eyes 27,500 by January

Markets may be near record levels, but Gautam Shah of Goldilocks Global Research believes the rally still has legs. He expects the Nifty 50 index to first test around 26,700 in the near term and move towards 27,500 by January.

“We have indeed seen a breakout. The news flow has got supportive, the breadth is getting better… All dips should get bought into, and the markets are headed for new lifetime highs and beyond. From a medium term perspective, we stay positioned for levels of 27,500,” Shah told CNBC-TV18.

Shah sees strong support for the index between 25,325 and 25,400, as long as that zone holds. He expects the next leg of the rally to be driven by mid-cap and small-cap stocks, which have lagged so far.

The mid-cap index, he said, needs to cross 60,000 for a potential 3,000-3,500-point upside, while the small-cap index must sustain above 18,200 to aim for 20,000 — close to lifetime highs.

On sectors, Shah continues to favour financials, metals, autos, power and infrastructure, with a special focus on public-sector banks. “I like the top three or four PSU banks, and I think they’re going to register stellar returns over the next six to 12 months,” he said.

He remains cautious on information technology, fast-moving consumer goods and pharmaceuticals, which he believes are not showing strong trend signals.

In commodities, Shah expects a pause in the recent rally in gold, silver, and Bitcoin, noting that a short-term correction of 10-15% is normal after a sharp rise.

He added, “The focus is going to go back into equities. Equities is where the bigger opportunity could be over the next six to 12 months. But don't get me wrong, I remain positive on gold and silver, if somebody is taking a three-year view, but if you are taking a three to six month view, these might not be good levels to add.”

For full interview, watch accompanying video

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