The actual weakness would start only if Nifty sustains below 10,870. Till then one should continue with a stock-specific positive bias, Sameet Chavan, Chief Analyst Technical, and Derivatives at Angel Broking Ltd, said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:
Q) Last week was a volatile one for Indian markets. Nifty50 failed to hold on to 11,300 levels. What led to the sell-off on D-Street?
A) Barring Tuesday’s session, the Nifty remained under pressure for the remaining part of the week. Technically speaking, momentum oscillators have been in the overbought zone for quite some time now.
In addition, 11,300-11,400 precisely coincides with the 78.6 percent retracement of the entire corrective move from record highs to March lows.
Hence, markets became a bit tentative when global markets started to correct a bit during the week. On the domestic front, one of the major drivers, RIL, saw some decent profit-booking and more importantly, the entire banking space remained under severe pressure. All these developments weighed heavily on the markets.
Q) Which are the important levels to track this week? What should be the strategy?
A) The actual weakness would start only if Nifty sustains below 10,870. Till then one should continue with a stock-specific positive bias.
However, on the flipside, 11,300-11,350 have also become a strong ceiling and the fresh leg of the rally would only unfold above this. Till then traders are advised to remain light within a slightly bigger range of 10,870 – 11,350.
Q) Based on the July expiry where do you see Nifty heading in the August series. Do you think we could make a dash towards 11,500? Or will the markets correct towards 10,500 levels?
A) Let’s see how the rollovers data from the FIIs desk has been. It will give some idea of how institutional players are positioned for the August series.
The rollover in Nifty is at 77.59 percent, which is in line with its 3-month average of 77.40 percent, whereas rollover in Bank Nifty is at 75.30 percent versus its average of 79 percent.
During the July series, FIIs formed long positions in the index futures segment. Their ‘Long Short Ratio’ at the start of the new series is 66 percent.
The weekly options data hints at a probable trading range of 11,000-11,300 in the initial part of the new series. So, if we combine this with technical observations, ideally the move outside the range of 10,870-11,350, would confirm where markets are heading.
But, if we go with the broader degree trend which is upward, the possibility of Nifty heading towards 11,500 is quite high as long as 10,870 is not broken.
Q) More than 100 stocks in BSE 500 index rallied 10-50 percent in July. In the smallcap index, the number is close to 160 that rose 10-100 percent in the same period. It looks like select small & midcap stocks are attracting buyers’ attention.
A) Practically speaking, in pre-COVID time, we were observing a strong divergence between the benchmark index Nifty and the small/ midcap indices for more than a year.
Post the coronavirus outbreak in March, we witnessed a massive fall in heavyweight counter to bring them to equilibrium and with this, the divergence between the benchmark and small/midcap spaces narrowed down drastically.
With markets recovering in the last three months, a lot of individual themes played out and in the midst of all, a lot of small and midcap stocks attracted buyers’ attention, leading to a colossal rally in few quality smaller names.
Q) Sectorally, IT, Energy and Healthcare stocks were the top sectors in July? A lot of stocks in the IT space hit a fresh 52-week high. What is leading the rally in these sectors?
A) In the times of pandemic, a lot of things changed globally and as per the new normal, the need of the hour has been the IT related services, Telecom and obviously Healthcare.
Globally it is observed that stocks from the IT and Healthcare spaces have soared to a great extent and our markets are clearly not behind. In fact, their spectacular performance was clearly reflected in their quarterly numbers.
So, with the result season kicked in, a lot of companies came out with stellar numbers and hence, this resulted in the overall rally in July.
Q) What are your top 3-5 trading ideas for the next 3-4 weeks?
A) As we just alluded to in the above section, the Healthcare space has been buzzing for the last few months now. So many stocks from this space have already clocked handsome gains.
At this juncture, we like Natco Pharma, which seemed to be giving some catch-up move to its larger peers.
Apart from this, globally Metals have started to perform well for the last few weeks. We like Tata Steel which is on the move now.
Also, from the midcap realty space, Godrej Properties has finally come out of its congestion zone after a brief pause of nearly five weeks.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
