One needs to be very agile while trading these mid and smallcap names. Ideally, one should remain light and start booking profits in the ongoing move.
We would continue with our ‘sell on rise’ approach and would expect the index to first slide towards 10,033 and then eventually to enter sub-10,000 levels quite soon, Sameet Chavan- Chief Analyst, Technicals and Derivatives, Angel Broking said in an interview to Moneycontrol's Kshitij Anand.
Q) It was a volatile week for Indian markets. The index managed to defend its 200-DMA but do you think the pain is over or in other words have we formed an intermediate bottom?
A) The week turned out to be a decider as we saw Nifty finally coming out of the recent congestion zone. In fact, we had clearly stated in our previous article that we would see this suspense getting unfolded in the first half.
In-line with expectation, the index made things clear on Tuesday after violating the 10,300 mark. Some respite in the last couple of sessions led to a weekly close well below this key point.
This was clearly an action-packed week for our traders as we once again saw some trended move after a consolidation of nearly three weeks. This was clearly on cards; but as we all know, timing such moves is not as easy as it looks in the hindsight.
Q) How are FIIs positioned in the markets? They have already sold over Rs 18,000 crore in the Indian market in Feb as per provisional data.
A) There has been no change in their (FIIs) stand as they have been a relentless seller in cash market since August 2017, except January 2018 during which we saw a sudden jump in the market from 10,400 towards 11,100.
In February 2018, they once again turned sellers and probably this was the main reason why we saw a strong sell-off in some of the heavyweight index constituents like HDFC twins, Larsen & Toubro and ICICI Bank.
On the future index front also, they turned net sellers last month and as a result, their ‘Long Short Ratio’ plunged drastically below the 50 mark from the previous figure of 80 percent at the end of the series.
Q) What should be the ideal strategy for mid & small caps post Budget which is attracting some bit of selling pressure?
A) The Mid and Small cap indices had shown topping out formations couple of weeks ahead of the ‘Union Budget’ and in fact, the selling intensified as the marquee heavyweights started correcting post the event.
Due to recent buying from DIIs, the fall got arrested and we saw some relief rally in the midcap counters. But, looking at the higher degree chart, this breather seems temporary in nature and hence, one needs to be very agile while trading these mid and smallcap names. Ideally, one should remain light and start booking profits in the ongoing move.
Q) What should be the strategy -- buy on dips or sell on rallies in the coming week?
A) We would continue with our ‘sell on rise’ approach and would expect the index to first slide towards 10,033 and then eventually to enter sub-10,000 levels quite soon.
However, before this, 10,140 – 10,350 has become a no-trade zone for the market. If any negativity has to resume, it would only happen after violating the 10,140 mark.
The ideal scenario to initiate short position would be either below this crucial junction or after seeing a decent relief rally towards the higher end i.e. 10,350 – 10,400. As of now, we do not expect the Nifty to surpass these hurdles in coming days.
Q) Top 3-5 stocks which are looking attractive at current levels based on technical?
A) Since it is slightly difficult envisaging the time target; traders ideally shouldn’t be too concerned about the time; rather keep focusing on mentioned key levels.
One should remain light and avoid taking undue risks in such kind of uncertainty. In case of some relief rally within the consolidation range, traders should focus on individual stocks and it would be wise to make timely exits as well.
For the coming week, traders can take a trading punt in selective PSBs like Bank of Baroda and Union Bank. However, since the entire space is like a falling knife, it’s advisable to follow strict stop losses and they should not be more than two percent from current levels.On the short side, we continue to like Tata Steel which still looks a good shorting candidate on a bounce towards Rs 620–625. The stock clearly poised for a drop towards Rs 570–550 levels. In addition, UltraTech Cement can offer better risk-reward in the coming week.