After nearly 35 percent run in the Nifty Midcap and Smallcap indices from March 24, there could be consolidation or profit-booking in both the indices in September before resuming an upward trajectory, though medium-to-long-term trend for them is positive, Ashish Kyal, Founder and CEO at Waves Strategy Advisors, says in an interview to Moneycontrol.
Any retracement towards Fibonacci 23.6 percent to 38.2 percent of the rise will be a good opportunity to buy stocks in the midcap and smallcap segments, he advises.
On the pharma, the Chartered Market Technician with vast experience in the capital markets advised that it is a good opportunity to use dips in the sector and stocks as opportunity to buy as the overall medium-to-long-term trend is intact.
The pharma sector has come out of eight years of consolidation and such correction is a healthy sign for the next sustainable up-move, he believes. Excerpts from the interview:
Do you expect the Nifty to decisively break the 19,000 mark this week? Do you see another 5 percent correction from here on?
The Nifty has been breaking below the prior weekly low since the past four weeks. Pullback we saw last week also got sold and prices closed near the lower end of the range. Now, further break below 19,220 can open targets for Gann level of 18,838. Over past few days, prices have been stuck within the range of 19,590 – 19,250 and on August 25, we broke the range there by suggesting that the trend is bearish as of now unless we see close back above the high of August 24, which is at 19,585 levels.
Selling is visible across sectors over the last week. So, over the short term, we might be in sell on rise market but we might see a cut to 18,838 or Head & Shoulder pattern target of 18,620 as long as prices sustain below 19,400 followed by 19,585 levels.
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Bank Nifty also showed reversal on the last day of the week as the index found a hurdle near 45,000 levels with support near 43,600. This week, one has to be cautious and wait for this range to break for a trend in that direction. Bank Nifty can provide leading indication for Nifty as well.
Two stocks that can outperform Nifty50 this week, and why?
Axis Bank showed a strong rise in prior week after correcting to the levels of Rs 928 and is on the verge of giving a break above the prior swing high at Rs 990 levels. Any close above this can result into a fresh rally on the upside with the targets of Rs 1,050 levels or higher. The stock also be starting the 3rd wave on upside as per Elliott wave pattern.
Rashtriya Chemicals and Fertilisers has shown a strong pick-up in volumes on the previous three days along with an impulsive rise. The Overall chart pattern looks good as stock has given breakout above the price action resistance area of Rs 120. We can expect pattern target on upside to Rs 135 with Rs 117 as important support.
Do you see more correction in the Nifty Pharma? It has fallen further after recent several days of consolidation...
The Nifty Pharma index has rallied from the lows made in March 2023 at 11,540 to the highs of 15,750 levels. That is a rally of more than 36 percent in just over five months and we are witnessing retracement of that up-move.
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It is a good opportunity to use dips in the pharma sector and stocks as opportunity to buy as the overall medium-to-long-term trend is intact. The pharma sector has come out of eight years of consolidation and such correction is a healthy sign for the next sustainable up-move.
Over near term, support for the sector is at 14,200 which is also 38.2 percent retracement of the entire rise. So, over the short term, profit-booking is possible in this sector but medium-to-long-term investors can nibble stocks from the space on every dip.
What do you make out of the ongoing consolidation in the Nifty Auto index?
The Nifty Auto index has been moving in a range since the past few weeks but stock-specific action is clearly witnessed in the midcap and smallcap auto ancillary space. CNX Auto is trading near 15,363 after forming a high at 15,912. We see time correction with minor price correction so far.
Also read: Seeing green shoots of pickup on volumes as inflation moderates: ITC CMD Sanjiv Puri
A break above 15,900 in this index will resume the next wave on upside for a move to 17,000 levels. So, short term consolidation or correction in this index can be ideal opportunity for medium to long term traders to enter into the auto and auto ancillary space.
Do you see the relentless buying continuing in the Nifty Midcap 100 and Smallcap 100 indices in September too?
Both Nifty Midcap and Smallcap indices have shown a rise of nearly 35 percent since March 24. Overall, the medium-to-long-term trend for this sector is positive but in September we are expecting consolidation or profit booking. There is a possibility that the market will take a breather over the near term before resuming the upward trajectory.
Also read: Sanjay Bembalkar of Union AMC identifies 3 segments in India with fantastic growth runway
So, for traders or investors, use the dips to buy to play out the medium-to-long-term growth story. Over the near term also, not all stocks from this sector might show a sharp correction. It is best to buy leaders that have outperformed during the current rise once they relieve their overbought state. So, any retracement towards Fibonacci 23.6 percent to 38.2 percent of the rise will be a good opportunity to buy the stocks in this sector. In a nutshell, we expect consolidation or profit-booking in September before the strong up move resumes again.
Do you think Apar Industries is done with the rally?
Apar Industries has shown an exponential rise in just over a year. The stock was trading near Rs 556 levels in May 2022 and touched the high of Rs 5,350 on August 21. This is 10 times increase in the stock price. The stock is still trading at 26 times its PE multiple which means the earnings momentum has been strong that backed the exponential rise.
Short-term profit-booking is not ruled out but medium-to-long-term investors can stay invested as long as the stock does not break the support near the Rs 4,000 levels. There will be natural tendency for traders to book profit seeing such exorbitant returns but wealth can be created by sitting tight in these type of stocks unless the fundamental or technical pattern has changed.
Follow Ashish Kyal on Twitter - @kyalashish
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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