The Nifty has support in the 21,850-21,900 zone. If this zone is violated, the index may have some room on the downside, Milan Vaishnav, CMT, MSTA, founder of Gemstone Equity Research & Advisory Services, says in an interview to Moneycontrol.
He expects some technical rebounds but overall, expects the Nifty to stay under corrective pressure. Backed by nearly two decades spent in the capital markets, Milan strongly recommends that blue-chip IT stocks should be accumulated at current levels.
Do you expect further correction in Nifty IT index (is it looking like rounding top kind of pattern) or is it the better time to accumulate these stocks?
The Nifty IT had shown a rounding top on the daily charts. However, it was that of a very short-term nature as the same is not visible at all on the weekly timeframe chart. In fact, on the weekly timeframe charts, Nifty IT has formed a classical Double Top resistance in the zone of 37,800-38,600. The index has retraced from this zone. These tops, though they are not exactly at the same level are quite wide three years apart and hence more potent.
The IT index has closed just a notch above the 200-DMA which is placed at 33,453. On the higher timeframe, the index is approaching the 50-week MA (moving average) which is placed at 32,833. This zone is expected to act as a potent and strong support area and therefore it is strongly recommended that blue-chip IT stocks should be accumulated at current levels.
Do you think the worst is over for the Nifty 50 or will it break the March bottom (March 20)?
I expect both things to occur. First, to begin with, some technical rebounds cannot be ruled out. Even if the overall trend remains on the downside, a technical rebound can be expected. Presently, Nifty has violated the 50-DMA on the daily chart which stands at 22,165.
On the weekly chart, the 20-week MA stands at 21,913. The Nifty has its support in the 21,850-21,900 zone. If this zone is violated, the index has some room on the downside as well. So, I expect some technical rebounds but also expect Nifty to stay under corrective pressure as it has some room in the downside.
Do you see any possibility of Nifty Bank breaking higher highs, higher lows formation (started since January) on the daily charts?
So far as breaking new highs is concerned, it is very much likely but may not happen too soon. A sustainable upmove shall take place on Nifty only if it manages to move past 48,700 levels. Unless this happens, the Nifty Bank index may remain in a trading range.
Again, importantly, it should be noted that we may see Nifty Bank improving its relative performance against Nifty.
Do you think Exide Industries looks overbought?
Certainly. It certainly looks overbought on both daily and weekly charts following a steep upmove the stock saw once it crossed above Rs 321 a couple of sessions ago. One must protect partial profits here and effectively trail the stop-loss levels higher to protect and optimize the bulk of the profits.
Do you think the Nifty FMCG is unlikely to break 200-day DMA, which has been acting as a key support twice since month?
The Nifty FMCG index has slipped below the 200-DMA which stands at 53,317. On the weekly chart, the index has closed a notch below its 50-week MA which is placed at 52,948. In the process, it has dragged its resistance lower to 53,300.
Importantly, though the FMCG index is inside the lagging quadrant of the RRG (relative rotation graph) when benchmarked against the Nifty 500 Index, it is seen sharply improving its relative momentum against the broader markets. By and large, I expect the downside here to stay limited and each decline in this space should be used to accumulate good stocks within this sector.
Any 2 stocks that you are buying in the current correction on the charts basis?
I would be looking at ONGC and SRF.
ONGC: The stock has broken out from a symmetrical triangle formation. Such formations, for most of the time, act as continuation patterns and the prices usually resume the movement in the direction of its prior trend. The RSI (relative strength index) shows a bullish divergence while OBV (on-balance volume) stays near its high point. The stock may test Rs 310-315 levels over the coming weeks.
SRF: SRF is seeing a strong improvement in its relative performance against the broader markets. A move above the Rs 2,550-2,600 zone will lead the stock to a multi-year breakout. The RS line against the broader markets is rising; it has reversed its trajectory and has crossed above the 50-period MA. The stock has a medium-term investment potential; it has the capacity to test Rs 2,800 - 2,825 levels over the coming weeks.
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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