See Nifty at 10,350 after likely short term correction: CLSA

Laurence Balanco of CLSA said many of momentum, breadth, headline indices as well as credit spreads are flashing their strongest warning signals since early 2015. This is not the time to be adding risk, he feels.

In best-case scenario, this corrective period takes the shape of a trading range over the summer as the market rotates out of the 'overbought' outperforming growth and yield sectors like technology, utilities and staples into reflation themes, in particular, small caps and financials, he said.

According to him, a break below 2.12-2.16 percent in the US 10-year yield or Brent oil below USD 41.51-43.57 a barrel would likely lead to a steeper corrective decline over the coming three months.

For India, Balanco said recent divergence suggests the market is due a pause/correction in the short term.

However, due to the bullish long-term profile for the Nifty, any short-term weakness back towards the 8,989-9,191 area should be seen as an attractive buying opportunity in anticipation of further gains towards next target areas at 10,350, 11,547 and 12,000, he feels.