Technically, FII money flow is continuing in the cash market even if not in futures and options. So as long as the dollar index continues to depreciate, carry trades in the riskier asset class will continue, Siddarth Bhamre, Independent Market Strategist, tells Moneycontrol’s Kshitij Anand in an interview. Edited excerpts: Q) The Nifty closed mildly in the red. What fuelled the price action on D-Street though the index moved in a range as gains were capped around 11,350 levels?
A) Well, barring Friday's move, markets have remained fairly in a range, with 11,350-11,400 acting as resistance as you pointed out in your question.
Though we are talking about gains being capped at higher levels as of now, despite Friday’s correction, the trend, so far, for the Nifty is up.
Firstly, traders should stop seeing the state of the economy and expect markets to correct. Markets will correct when they have to correct. There are some fundamental and some technical reasons for this rally.
Fundamentally, one of the most important sectors for the market which is banking has, so far, not shown any signs of stress. Well, few may argue that it will show stress after one or two quarters, so let’s park that thought for now.
Technically, we are witnessing FIIs money-flow continuing in the cash market if not FNO (futures and options). So as long as the dollar index continues to depreciate, carry trades in the riskier asset class will continue.
Q) How is the coming week likely to pan out for investors? What does the technical suggest, important levels that traders should watch out for?
A) In a strong uptrend, breakdowns are false and breakouts are real. We did see 11,000 support breached only to be scaled back again. From a short-term perspective, derivatives data is giving interesting insight.
The Nifty50 corrected due to long unwinding, while the Bank Nifty corrects with the formation of short positions. Though in the last few days banking didn’t underperform, it did when we increase the time zone to one month.
On the other hand, other heavyweights and sectorally IT contributed to the Nifty’s outperformance. On Friday, again the Bank Nifty corrected with the formation of shorts.
Technically, the Bank Nifty has failed to make a higher top in this uptrend and the zone of 20,900-21,000 is very important to support because in the last two months, the Bank Nifty has bounced thrice from it.
On the other hand, the Nifty is still in an uptrend unless it closes below 10,900. So it is the Nifty for the bulls and the Bank Nifty for the bears.
Q) Sectorally, capital goods, industrial, and auto were among the top gainers in the week gone by. What is driving the rally in these themes?
A) Auto is somewhat easy to explain. Firstly, as markets were rallying, it triggered some short-covering in this space.
Also interestingly, July's monthly sales numbers were beating estimates, which led to further short covering and some cash buying. It is an interesting space and one should be stock-specific here.
Capital goods and industrial have been laggard and they are now showing some up move but I won’t term it even catch-up because underperformance is huge and this space can be safely avoided as of now.
Q) Mid & smallcaps outperform on most choppy days. Are investors chasing growth in a volatile market?
A) Retail participation is scaling new heights and the reason for it is known to all. Also, I believe that more than growth, it is a valuation perspective that is more convincing to pitch midcaps and small caps at this point in time.
A combination of these two factors has ensured this segment outperforming. However, from a trading perspective, till the Nifty doesn’t move decisively above 11,400, I would suggest not to have high exposure in this space.
Q) What are your top trading ideas for a time horizon of three-four weeks?
A) Here is a list of stocks that one can deploy money in:
Eicher Motors: Sell| Target Rs 18,400
Quarterly numbers disappointed markets. The stock corrected and closed below 20 DMA on very heavy volumes.
There are significant short positions created in futures. 21,000 (just above 20-DMA) should be the stop loss for those shorting. Quite likely that stock may visit 18,400 support.
Cadila Healthcare: Buy| Target Rs 430-435
Pharma is outperforming. Cadila has seen accumulation in the range of 360-380. It may consolidate for some time and challenge that resistance of 410 again.
The upmove in this counter is backed by the formation of longs and a close above 410, the stock can move towards 430-435 zone. Place a stop loss around 370.
Hero MotoCorp: Buy| Target Rs 3,000
The stock is well above its pre-COVID levels, which is surely a sign of strength. The level of 2,870-2,880 is a resistance zone but a correction from this zone didn’t see the formation of shorts.
In fact, the stock has rallied with the formation of longs. This is again a sign of strength. A positional trader can have aggressive targets above 3,000 with rolling stop-loss starting in the 2,650-2,670 zone
Disclaimer: The views and investment tips expressed by 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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
