According to Sudeep Shah of SBI Securities, technical indicators suggest strength in the IT sector, presenting potential opportunities for investors. "Despite consolidation, Nifty IT has strongly outperformed the frontline indices. The ratio chart of Nifty IT, as compared to Nifty, has been marking the higher highs since the last four trading sessions," he reasoned.
He is bullish on VIP Industries and Whirlpool of India in the current market correction. According to him, Whirlpool has given Cup pattern breakout on a daily scale and this breakout is confirmed by robust volume. VIP Industries has formed a strong base near the support zone (200-day EMA) and witnessed a sharp rebound with robust volume, while the momentum indicators and oscillators are also suggesting bullish momentum, said the Head of Technical and Derivative Research at SBI Securities with over 17 years of experience.
Will the bears be able to drag Nifty 50 below September low and consolidate there next week?
Due to the geopolitical tensions in the Middle East, Nifty has experienced a sharp correction of 4.45 percent over the past week, closing at the psychological level of 25,000. On the weekly chart, a sizeable bearish candle has formed, indicating sustained selling pressure. From its all-time high, the index has dropped by over 1,250 points, reflecting the impact of external factors on market sentiment.
With this decline, Nifty has slipped below its 50-day EMA (Exponential Moving Average) for the first time in 84 trading sessions. Both the 20-day (25,504) and 50-day EMA (25,065) are starting to turn lower, indicating further weakness. Additionally, the upward slope of the 100-day and 200-day EMA has slowed considerably, suggesting a loss of momentum. The daily RSI (Relative Strength Index) is also in a downtrend and is nearing the 40 level, signaling increased bearish sentiment and the potential for continued selling pressure.
These technical indicators point to the likelihood of further selling pressure in the upcoming trading sessions. Additionally, the volatility index, India VIX, has surged by over 18 percent in the past week, signaling heightened market uncertainty and increased risk in the near term.
Talking about Nifty levels, the zone of 24,800-24,750 will act as immediate support for the index as the 61.8 percent Fibonacci retracement level of its prior upward move (23,893-26,277) is placed in that region and it coincides with the prior swing low. If the index slips below the level of 24,750, then the 100-day EMA will act as crucial support for the index, which is currently placed at the 24,375 level.
Do you see a similar situation for the Bank Nifty, which is closer to the upward sloping support trendline now?
From the all-time high level, the banking benchmark index Bank Nifty has corrected nearly 3,000 points or 5.42 percent in just 6 trading sessions. Along with this sharp fall, the index has slipped below its 20 and 50-day EMA level. These averages have started edging lower. Further, the rising slope of 100 and 200-day EMA has slowed down significantly. Furthermore, the daily RSI has given trendline breakdown, which is a bearish sign.
Going ahead, the 100-day EMA zone of 51,000-50,900 will act as immediate support for the index. Any sustainable move below the level of 50,900 will lead to further correction in the index. In that case, the zone of 50,400-50,300 will act as a crucial support for the index. On the upside, the 50-day EMA will act as an immediate hurdle for the index, which is currently placed in the zone of 51,900-51,950 level.
Which are the two stocks that look very attractive in the current market correction?
The stock marked a low of Rs 429.60 on August 14 and witnessed a sharp upside rally of nearly 37 percent in just 28 trading sessions. Thereafter, it has witnessed a throwback along with low volume. The throwback was halted near the 200-day EMA level. It has formed a strong base near the support zone and witnessed a sharp rebound. The reversal from the support zone is confirmed by robust volume. The momentum indicators and oscillators are also suggesting bullish momentum. Hence, we recommend accumulating the stock in the zone of Rs 565-560 level with a stop-loss of Rs 545. On the upside, it is likely to test the level of Rs 590, followed by Rs 610 in the short term.
The stock has given Cup pattern breakout on a daily scale. This breakout is confirmed by robust volume. In addition, the stock has strongly outperformed frontline indices. As the stock is trading at a 52-week high level, all the momentum indicators and oscillators are suggesting strong bullish momentum in the stock. Hence, we recommend accumulating the stock in the zone of Rs 2,370-2,360 level with a stop-loss of Rs 2,290. On the upside, it is likely to test the level of Rs 2,480, followed by Rs 2,550 in the short term.
Do you think Godrej Properties will bottom out around Rs 2,800 and enter into oversold zone?
On September 26, the stock formed a high wave candle on a daily scale and thereafter witnessed a sharp correction of nearly 15 percent in just 6 trading sessions. Along with this fall, the stock has slipped below its 20, 50, and 100-day EMA level, which is a bearish sign.
Going ahead, the zone of 28,20-2,800 will act as immediate support for the stock as prior swing lows are placed in that region. Hence, there is a possibility that the stock may take short-term pause near this level and may witness consolidation.
Will M&M Financial Services look oversold after hitting 200-day EMA? Does it mean one should buy?
No, despite the sharp correction in M&M Financial Services, the stock does not look oversold. The daily RSI is currently quoting at 36, and it is in falling mode, which indicates further selling pressure in stock.
Hence, we recommend to avoid the buying near the 200-day EMA level. The indicators can stay in the oversold region for a very long period. The oversold condition doesn’t mean we should buy the stock. We believe the reversal from oversold conditions should be confirmed by price action.
Is the Nifty IT creating Flag ahead of earnings season?
Yes, after registering the high of 43,645, the Nifty IT has slid into the period of consolidation. During the period of consolidation, the index is forming the Bullish Flag like pattern. Despite this consolidation, Nifty IT has strongly outperformed the frontline indices. The ratio chart of Nifty IT, as compared to Nifty, has been marking the higher highs since the last four trading sessions. This suggests strength in the sector, presenting potential opportunities for investors.
Talking about levels, the zone of 42,600-42,700 will act as an immediate hurdle for the index. Any sustainable move above the level of 42,700 will lead to sharp upside rally upto the level of 43,300, followed by 43,800 in the short term.
Is it the time to buy PSU bank stocks?
While Nifty PSU Bank has shown some recent outperformance, the short to medium-term trend remains bearish as it's trading below the 20, 50, and 100-day EMAs. The index is stabilizing near its 200-day EMA, indicating a potential base formation activity. However, a clear buying opportunity will emerge only if it sustains above the 6,900 level, which would signal stronger momentum. Until it breaks above this key resistance level, it's best to remain cautious and avoid PSU banks for now from a trading perspective.
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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