After the Nifty dropped below 200 DEMA (Day Exponential Moving Average - 23,541), "wait for markets to capitulate on the downside," Rohit Srivastava of Indiacharts said in an interview to Moneycontrol.
According to the veteran with nearly three decades spent in the equity markets, when less than 60 percent of stocks are above the 200 DMA, it can signal a potential bear phase ahead for the markets. That has happened, he said.
He believes patience is needed to see a capitulation before one expects a meaningful bounce. "Till then every attempt to rises can get sold into," said Founder and Market Strategist of Indiacharts.
Is the Nifty 50 looking oversold now, and could it rebound in the upcoming sessions?
While some short term indicators can appear oversold like the RSI at 30 or the Put/Call ratio at 0.70, some medium term sentiment indicators are not there yet. FIIs are short but not near the highest in the last few years. Patience is needed to see a capitulation before we expect a meaningful bounce. Till then every attempt to rises can get sold into. For example: we still do not see large selling volumes as should be at a climax.
Are you still bearish on the Nifty FMCG index?
The fall is already very significant to expect a lot more here, so we should watch out for early signs of a reversal in this sector before Nifty, but nothing can be seen yet. But it is very oversold. In many charts the long term trend of FMCG stocks is damaged.
What should traders do now, as the benchmark index has fallen below the 200-day EMA?
Wait for markets to capitulate on the downside. While Nifty falls below the 200 DMA only 42 percent of Nifty500 stocks are above the 200 DMA. A reading below 10 percent would be extreme. This is a process and can take months but tells us something has changed. When less than 60 percent of stocks are above the 200 DMA, it can signal a potential bear phase ahead for the markets. That has happened.
Do you see a major impact on the volume and loss of weekly opportunities to trade with the end of the weekly expiry of the Bank Nifty?
The impact on volumes is already visible if we study the total number of shares traded every day on the exchange. The support markets were getting every week from these traders is now absent.
Do you think the Nifty IT will avoid a major correction and, in fact, outperform other sectors?
This is a tough call and depends on global markets and the world economy. The US market has fallen last week and if that continues then it can impact the tech sector negatively even though they have held out so far. So it maybe early to make any conclusions.
Which sectors are in a position to rebound? Will this be sustainable?
Many sectors are falling in five waves marking the start of multi-month bearish patterns. So while there will be a rebound at some point of time it might now be sustainable and will not make new all-time highs for months to come. There will however be many trading opportunities in between for those who are good at timing the market.
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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