Chartist Talk: Rahul Ghose sees choppy August for Nifty, expects continued Bank Nifty outperformance

The short answer is yes, but it could be a time correction along with price. Retesting or even falling below the April lows is definitely a possibility but the oversold few months could see a pause before resuming its downward move. Investors should keep an eye on how major players perform and on any global cues, especially around the US tech sector.

Charts of majority of bellwether IT companies like Infosys, and TCS are pointing towards further downside (5-10 percent from current levels post a pause).

Given the subdued start to the August series, do you expect August to be a bearish month? Historically, how does the market typically perform in August?

Although August has kicked off on a weak note, with the market down across most sectors—from pharma and IT to metals, we expect buying on dips in August and see a move up as well. Historically, August has been mixed: over the last decade, markets have moved higher more often than not, but typically with modest returns. That said, August is often a volatile month, and this year global uncertainties and FII activity could keep things choppy.

In the current market decline, which two stocks would you consider buying, and what’s the rationale behind your picks?

In the current environment, I would lean towards stocks with solid fundamentals and clear growth drivers. For example, Larsen & Toubro (L&T) continues to stand out with a solid order book and high visibility on future projects. It tends to hold up well even when the market gets rough.

In pharma space, Torrent Pharma is technically looking strong.

Do the charts suggest that the Bank Nifty will continue to outperform the Nifty 50, or is it likely to break below its long-term moving averages in the coming weeks?

Yes, we expect it to outperform. Bank Nifty has now moved below several important moving averages, and recent chart patterns look a bit bearish, but as we said for the index, the buy on dips should be the outlook for August. On the upside, 56,700-57,300 is a strong resistance, and on the downside 54,100-53,500 is a strong support level.

Amidst the market downturn, which index is most likely to show relative outperformance?

Right now, large-cap stocks—those at the top of the Nifty 50—look more resilient, especially compared to smaller companies. Investors seem to be favouring bigger, more stable names, especially during this period of heightened risk aversion. It’s a typical “flight to safety” we see when the going gets tough. Consider HDFC Bank, ICICI Bank & Larsen & Toubro for example.

Do you expect the rally in Jindal Stainless and Emami to continue?

Jindal Stainless has been on a strong run recently, and it does have some seasonal tailwinds. Still, after the recent rally, I’d expect some consolidation; gains may slow, especially if the broader market remains shaky. Technically too, the price action suggests that the stock is likely to remain sideways for a bit before resuming its uptrend again

Emami delivered good results last quarter, especially on margins, and saw a strong bounce. The question is whether consumption, especially in rural areas, continues to recover. If so, Emami should continue to do well, but it’s something to monitor month by month. Technically the monthly and quarterly charts are looking strong, and stock could be considered on every dips. A move above Rs 650 would be a breakout for Emami.

What’s your outlook on the Midcap and Smallcap indices, both of which saw another week of sharp corrections?

For now, caution is warranted on the midcap and smallcap space. We’ve seen some sharp declines and a lot of stocks in these segments are trading below 200-DMA—basically, their long-term average. With foreign investors pulling money out and sentiment fragile, these parts of the market could see more pressure unless we get a strong rebound in risk appetite soon.

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