After the Nifty 50 hit a new record high last week, the trendline indicated a new resistance near 22,360. The index needs to trade above this level for a few days to prove that the breakout from consolidation was sustainable, according to Rohit Srivastava, founder of Strike Money Analytics and Indiacharts.
The veteran with nearly three decades spent in the equity markets shared with Moneycontrol in an interview that pharma or healthcare was the only sector that has the hope to stand out in FY25.
Srivastava appears bullish about the market trends but stays cautious. Excerpts from the interview:
Do you expect the rally to be unstoppable with the Nifty 50 past 23,000?
The optimism comes from the new highs the Nifty has scaled. The trendline gives us a resistance near 22,360 above which the Nifty needs to sustain for a few days before we can qualify it as a sustainable breakout and not a false one.
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This will keep us on our toes in the current week but, other than that, multiple divergences in indicators like the RSI (relative strength index) make it look like a topping process in the market.
Do you see the Bank Nifty at a fresh record high soon?
A similar resistance for Bank Nifty is at 47,670, and unless we sustain above that it looks like Bank Nifty is in a counter trend bounce after falling for the last two months.
In fact, Bank Nifty and the Nifty Smallcap 100 indices are far below the all-time highs compared to the Nifty and this results in inter-market divergences which are advanced red-flags against a rising market. It is a bit early to be uncorking the champagne.
What do the charts of Nifty FMCG indicate?
Nifty FMCG has been down for weeks now even when the market was rising so it may not be a surprise that in the short term the FMCG sector stocks come to the rescue of the market cushioning any major decline. This needs to be watched closely. The short-term momentum in the FMCG stocks is bullish as of now.
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Do the Nifty Auto bulls appear unstoppable?
The daily RMI (Rohit Momentum Indicator) remains in the 'sell' mode, the weekly RSI at 86 is in the deep overbought territory. These readings on the weekend after last week's moves call for caution amid the recent volatility in the Nifty Auto index.
Which are the strong bets among sectors for FY25?
The only sector that has hope to stand out in FY25 is probably the pharma or healthcare sector. The sector itself comes out of a nearly two-year correction. The rally in pharma stocks this year therefore starts a new wave higher.
Defensive buying can continue to push the sector in the months ahead as volatility increases in the election year. The healthcare stocks offer a valuation advantage which will keep a safety net in place.
Do you see strong breakout in the Nifty PSE and Energy indices?
Recently the weekly RSI for the Nifty PSE index was as high as 92 and is now at 89. What that means is that we have barely seen a correction from the extreme overbought territory. The last time such a reading was seen was 2003 and the index fell by more than 10 percent before going higher.
In that the RSI came back below 70, where we are not overbought anymore. Till such time we should not get carried away by the short term spikes in individual stock prices. The Nifty Energy index weekly RSI is also at 91 after making a high of 91. These are not levels where you want to be a buyer.
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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