The short-term trend still suggests 'buy on dips' till the time the swing low of 15450 stays untouched. However, the upside from here too won’t be that easy since the volatility index VIX is trading near its bottom, Mehul Kothari, AVP – Technical Research at AnandRathi said in an interview with Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) A volatile week for India markets as Nifty broke below 15800 levels. What led to the price action?
A) Although we are overall bullish, the domestic market was a bit heavy when the Nifty50 index reached a new high of 15,900 last month. A healthy dip was needed for the markets to rise higher and that is what has happened during the week.
With regards to specific triggers -- on Thursday FIIs created heavy shorts in index futures and also their covered their sold PE options. This lead to a dip in the last couple of sessions.
Q) After the recent sell-off where do you see markets heading in the coming week? Which are the important levels to track?
A) For the coming week, we expect the previous swing low of 15450 to act as strong support for the index. Unless that support is not broken on a daily closing basis, the very short-term trend still remains strong.
However, on the upside fresh momentum would be seen only above 15,750 levels. In that scenario, we could see new highs in the market.
Q) Small & midcap outperformed benchmark indices – what is leading to the price action and will the momentum continue if the tide reverses?
A) Generally, when the benchmark consolidates in a strong uptrend the buying gets diverted to the mid and smallcap stocks and that is what has happened during the week.
However, we reiterate our view that the index NIFTY 500 is stuck at the larger degree trend line resistance at 13700 mark. This resistance coincides with the 200% retracement of its previous move.
The index is consolidating near this price band for the last five weeks and we don’t expect any major fireworks unless this resistance is crossed. Thus, one needs to keep the NIFTY 500 index on their radar. The support for the index is at 13150.
Q) FIIs are net sellers so far in July in the cash market of the Indian equity markets. What has spooked them and it looks like much of the rally is led by DII and retail investors?
A) It seems that after such a staggering rally in the markets; the FIIs are in the mood of taking some profits off the table.
On the other hand, DIIs and retail have participated a lot in the cash markets. Now this kind of participation by the retail is a bit cautionary sign.
In fact, even in the futures segment Retail has huge long positions. This might not bode well for the markets in the coming few weeks.
Q) The much talked about Zomato IPO will open in the coming week. What are your views on the IPO, and can it give a good 50% kind of pop on a listing day?
A) So far we have not come up with an IPO note for Zomato. Hence it will be difficult to comment on the same. However, we feel that for massive listing gains for any stock the market's sentiment should remain positive. As of now wait and watch.
Q) We are experiencing selloff on every rise towards 16000. Has the market turned from buy-on dips to sell on rise?
A) 16000 is a strong psychological level and that is the reason why there could be so much supply there. Another reason could be too much of CE writing (Call option writing) there.
The short-term trend still remains buy on dips till the time the swing low of 15450 stays untouched. However, the upside from here too won’t be that easy since the volatility index VIX is trading near its bottom.
The zone of 12 – 10 has been a support for a year in VIX and there is a possibility of a spike in it from here on.
Q) Sectorally, buying was seen in realty as well as banking stocks. What led to the price action?
A) We already discussed the potential of NIFTY REALTY index due to the golden crossover. The index did exceptionally well from there, and now at this juncture too, it is on the verge of a major breakout.
A move above 370 in NIFTY REALTY would trigger strong buying in its constituents. With regards to banking space; it has been a laggard for quite some time.
Although there was some momentum in BANKNIFTY during the week, the follow-up move was missing. The sector would remain sideways till the time NIFTY BANK does not confirm a breakout above 35800 mark.
Q) Your top 3-5 trading ideas for the next 3-4 weeks?
A) Here are our trading recommendations -
DLF: Buy| LTP: Rs 300| Stop Loss: Rs 290| Target: Rs 320| Upside: 6%
The NIFTY REALTY index is on the verge of a major breakout and DLF is one of the heavyweights in the index. The stock is in an uptrend and has confirmed a range breakout in hourly charts. Even the momentum oscillators are positively placed.
Traders can go long in the stock at the current market price with a stop loss of Rs 290 for an upside target of Rs 320.
Oberoi Realty: Buy| LTP: Rs 670| Stop Loss: Rs 635| Target: Rs 740| Upside: 10%
A few weeks back Oberoi Realty confirmed a multiyear breakout. The price action was accompanied with exceptional volumes and it resembles an inverse Head & Shoulder pattern. After retesting the neckline the stock is now again on the verge of a fresh breakout.
The theoretical target for the pattern comes around Rs 900. Since the pattern is intact we maintain our bullish stance on the stock. Traders can go long in the stock in the range of Rs 675 – 665 with a stop loss of Rs 635 for an upside target of Rs 740.
SpiceJet: Buy| LTP: Rs 80.7| Stop Loss: Rs 77| Target: Rs 88| Upside: 9%
Since the last many weeks, SpiceJet is stuck in a small range of Rs 83 - 77. At this juncture, it is trading near the upper band of this range. During the process, it has managed to sustain above its 200 DEMA and 200 SMA which indicates strength.
We expect faster momentum on the higher side once it clears the Rs 83 mark. Traders can go long in the stock at the current market price with a stop loss of Rs 77 for an upside target of Rs 88.
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