Dharmesh Shah of ICICI Securities expects market volatility to remain elevated, tracking tariff development. Hence, investors should focus on domestic themes rather than global and focus on accumulating quality stocks (backed by strong earnings) in a staggered manner, where traders should refrain from taking leveraged positions, he advised.
Going ahead, according to him, the Nifty is expected to consolidate within the broader range of 21,900-23,500.
With the ongoing volatility due to global uncertainties and the recent correction of 23 percent and 27 percent already in place, the possibility of further 2-4 percent of correction cannot be ruled out in the Nifty Midcap and Smallcap indices before getting into upward journey, said the Vice President at ICICI Securities in an interview to Moneycontrol.
Do you see a high possibility of Nifty breaking the March low (21,965) in April, rather than rebounding to 24,000?
Contrary to our view, the global as well as Indian market witnessed a sharp selloff in recent week on the back of US tariff announcement. Structurally, the Nifty is now undergoing healthy retracement following the sharp up-move of 1,900 points from the low of 21,964. Going ahead, we expect the Nifty to consolidate within the broader range of 21,900-23,500, where stock specific action is likely to continue amid elevated volatility onset of Q4 earning season, coupled with RBI Policy, Tariff development and US inflation print.
The key point to highlight is that the Nifty Financial index has witnessed relative outperformance in this entire up-move. Hence, any positive outcome from the upcoming RBI Policy will only serve as a trigger to the further leg of up-move, which will eventually nudge the benchmark index towards 23,500 as the Nifty Financial sector contributes ~35 percent of the weightage in the Nifty index. Tracking the ongoing global volatility, our target of 24,000 will be delayed in subsequent months, which will be achievable on the breaking of the upper end of the consolidation mark, which is at 23,500.
What strategy are you advising your clients now, considering the shift in market sentiment?
We expect volatility would remain elevated tracking tariff development. Hence, investors should focus on domestic themes rather than global and focus on accumulating quality stocks (backed by strong earnings) in a staggered manner, where traders should refrain from taking leveraged position. On the sectoral front, Banking, NBFC, Power, Defence and Hospitality would be in focus.
Can Bank Nifty outperform Nifty 50 and surpass the 53,000 mark soon, given its strong chart structure?
The Bank Nifty index observed a sharp up-move of 9 percent from the multi support zone of 47,800 and is now witnessing a shallow retracement wherein it has not even retraced 38.2 percent, indicating robust price structure. The upcoming RBI Policy will further dictate the trend which would have a bearing on the benchmark, wherein any above expectation outcome would led to a gradual up move towards 52,500. Meanwhile, the psychological mark of 50,000 will serve as an immediate support.
Are you avoiding the IT sector now? Will the Nifty IT index easily break the June 2024 low in the coming weeks?
The Indian IT sector is likely to face headwinds due to potential client-level budget cuts, amid reciprocal tariff, which would be inflationary as well as impact economic growth in the US. Structurally, the Nifty IT sector has been relatively underperforming the benchmark index amid ongoing global uncertainties.
Looking at the current setup, the index witnessed a long-term trendline breakdown (joining the lows of April 2023 and June 2024), indicating a pause in the upward momentum. However, the technical setup suggests that the zone of 33,200-33,000 will serve as immediate support (being 200-week EMA), which has been held on multiple occasions since CY-09 (barring CY-20), amid oversold conditions where the index is likely to undergo base formation in the coming weeks.
Do you see the Nifty FMCG bulls gaining strength in the weeks to come?
The Nifty FMCG index witnessed a breather after correcting 24 percent from the September 2024 high and arrested the fall at a 50 percent retracement of the up-move from March 2022 to the September 2024 rally (33,407-66,438), amid oversold conditions. However, the price structure suggests it is more of a technical pullback from the oversold territory, further supported by a cool-off in crude oil prices. Going ahead, we expect the index to consolidate further amid ongoing volatility, wherein stock-specific action is likely to continue.
Do the charts indicate that the fall in Nifty Midcap and Small cap indices is likely to extend in coming weeks?
Historically, maximum average correction in Midcap and small cap indices have been to the tune of 27 percent and 29 percent. With the ongoing volatility due to global uncertainties and the recent correction of 23 percent and 27 percent already in place, the possibility of 2-4 percent of correction cannot be ruled out. However, investors should note that post such sharp corrections, both indices have seen an average 28 percent rally in the subsequent six months.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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