The indications are in the favour of a further slide but we suggest waiting for some rebound to create fresh shorts as risk-to-reward ratio is not favourable for investors, and we advise investors to deploy bearish option strategies instead of naked futures, Jayant Manglik, President, Religare Broking, said in an interview.
Q. Nifty50 seems to be in the bear grip. It also markets the fifth week of decline on weekly basis. Is it time to go short on the index? If yes, what will be the target and stop loss which one should keep in mind?
A. The Nifty declined nearly 7 percent in September and it has now reached close to its major support zone of long-term moving average (200-EMA), which currently lies around 10,770.
Though the indications are in the favour of the further slide we suggest waiting for some rebound to create fresh shorts as the risk-to-reward ratio is not favourable for investors. Also, we advise investors to deploy bearish option strategies instead of naked futures.
Q. How is Infibeam, Yes Bank looking on technical charts?
A. Infibeam has reached close to its record low after the sharp plunge of over 70 percent seen on September 28. We advise investors to avoid holding any position in the stock at the current level.
With respect to Yes Bank, the stock declined sharply last week, which has resulted in a reversal of the long-term uptrend. Technically, the next crucial support exists at Rs 160 and it may take a breather around that level. We expect gradual recovery ahead as it would face hurdle around Rs 205-225 range.
Q. How is market likely to trade in October series? Do you expect more pain?
A. We believe that the negative bias is here to stay. More than the benchmark index, the decline on the stock specific front could further dent the sentiment. We suggest reducing positions on the bounce and staying light.
Q. What should be the right strategy of investors for small and mid-caps which have seen destruction in value?
A. In line with the benchmark index, both midcap and small-caps are under tremendous pressure and we feel they may deteriorate further in the near future.
We suggest investors to have a selective approach and gradually add fundamentally sound counters on dips, with medium to long-term perspective.
Q. What is your call on rupee? Do you see some more weakness for the currency in October?
A. The rupee has registered its biggest quarterly decline since June 2013 on the back of trade war tensions, depreciating emerging market currencies, rising crude oil prices and widening current account deficit.
It has taken some support after the government took measures and raised import duties on some products. After a small breather, the rupee is likely to continue with its declining trajectory as the fears are still not allayed. In case, the local unit breaches 73.00 (spot) mark, it will open the way for a further decline towards 74.00 levels.
Q. Top three stocks which investors can look at for the coming week for a minimum holding period of 1 month?
A. Keeping in the mind the prevailing trend, it’s advisable to maintain positions on both sides of the market.
Lupin: Buy| LTP: Rs 900.9| Initiation range: 890-900| Target: Rs 980| Stop loss: 860| Return: 9 percent
Lupin witnessed a decent profit taking and found support around the multiple moving averages (200/100/50-EMA) on the daily chart. It is rebounding from thereon and is likely to maintain this bias ahead as well. Traders should use this dip to initiate fresh longs through Call option as per the mentioned levels.
Canara Bank: Sell Futures| Last Close: Rs 221.2| Initiation range: Rs 225-230| Target: Rs 200| Stop Loss: Rs 240| Return: 9.5 percent
After it failed to cross its resistance hurdle of multiple moving averages around Rs 294, Canara Bank has witnessed a steep fall of late and is likely to maintain this bias ahead too.
Further, we have similar indications from majority PSU banking counters. We advise using any uptick to create fresh shorts within the given range.
Titan Company: Sell Futures| Last Close: Rs 806.8| Initiation range: Rs 815-825| Target: Rs 760| Stop Loss: Rs 840| Return: 5 percent
Titan Company has been consolidating for the past ten months now and has formed a distribution pattern “Head and Shoulder” on the weekly chart. It is trading on the verge of a breakdown from the same and is likely to witness a sharp fall.
The positioning of confirmation indicators is also in sync. Traders should use any bounce to go short in the mentioned zone.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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