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'Coronavirus a ‘black swan’ event; next support for Nifty placed at 11,100 levels'

The Nifty is near the critical support zone of 11,200-11,100 and if it stabilises here then investors should start accumulating good quality stocks while traders can go long in stocks which have relative strength

February 29, 2020 / 08:45 AM IST
 
 
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The market is going through one of the toughest phases because coronavirus (COVID-19) is becoming a pandemic from an epidemic, which is causing worries of a global recession, Amit Gupta, Co-Founder & CEO, TradingBells tells Moneycontrol’s Kshitij Anand.

Q. The Nifty broke below crucial support levels of 11,300 levels. Stock market investors lose Rs 10 lakh crore in six trading sessions. Global markets lost some $3.6 trillion in market capitalisation. What is the way ahead for Indian markets?

A. The market is going through one of the toughest phases because COVID-19 is becoming a pandemic from an epidemic, which is causing worries of a global recession.

The Indian equity market witnessed one of the steepest weekly falls in the history where Nifty ended with a cut of more than 7 percent and February 28 was the deadliest day where it witnessed a cut of more than 400 points.

The overall global equity markets will continue to have an eye on further development with respect to COVID-19. Any signs of relief could result in a pullback. It is difficult to predict the extent and impact of the virus and therefore it is becoming a black swan event and the market does not like uncertainty.

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Q. The Nifty fell over 3 percent in the February series. What is the outlook for the March series as well? Do you think the Nifty50 will breach 11,000 or will it recovery back towards 11,800-12,000 levels?

A. Technically, the Nifty has a sacrosanct support zone of 11,200-11,100 which coincides with the beginning point of corporate tax cut rally.

There is a good chance that the market may stabilise here and witness a pullback rally next week towards 200-DMA of 11,687 and above 200-DMA of 11,687, we can expect further upside where 11,900-12,000 area which will be the next resistance zone.

If Nifty50 slips below 11,100 level due to COVID-19 worries then things may become ugly for longer-term where 10,700 would be the next support level.

Q. Where do you see the Rupee heading in March? Do you see more depreciation?

A. The Rupee is depreciating because of the fall in the equity markets and weakness in Asian currencies. But the fall in crude oil prices is acting as a major tailwind for the Rupee, therefore, it is not showing major weakness.

Technically, USDINR is near a critical resistance zone of 72.25-72.5 where it may see profit booking or selling pressure but if it crosses the level of 72.5 then we can expect major weakness in the rupee towards 74-74.5 area otherwise it may remain range-bound where 71.3-71 is important support zone.

Q. What is the strategy which one could deploy for the coming week?

A. The Nifty is near the critical support zone of 11,200-11,100 and if it stabilises here then investors should start accumulating good quality stocks while traders can go long in stocks which have relative strength.

Options are very expensive due to a sharp rise in volatility, and if the market shows any kind of respite then traders can write options especially put options with stop loss below 11,000.

If the Nifty fails to recover from 11,200-11,100 zone then long positions should be avoided completely.

Q. Any top three to five breakout buys which you think could be bought for March series?  

A. There are no major breakouts in any stock due to vertical fall in the market but some stocks are providing good buying opportunity in the ongoing correction.

Info Edge is looking attractive as it witnessed a bullish hammer candlestick pattern on 200-DMA with a rise in the volume where we can expect a target of 2820 in the coming days.

Varun Beverages is an outperforming stock that is consolidating with a symmetrical triangle formation and ready to break out for a new leg of a rally where we can expect a target of 925 in the coming days.

United Spirit is another counter which is in bullish momentum where after correction it took support at a previous breakout point of 660 and then witnessed bullish hammer candlestick formation with a surge in the volume where we can expect a target of 740 in coming days.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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