The major trend is bullish and the minor trend for Nifty is sideways. For next week, the Nifty is expected to consolidate in the range of 11,750-12,000, said Romesh Tiwari, of CapitalAim
I think for traders it is better to lighten their long positions and wait for this market to consolidate. Yes, quality largecaps will be safer bet compared to midcaps until the Budget or until the Nifty is trading below 12,000, Romesh Tiwari, Head of research, CapitalAim, said in an interview with Moneycontrol’s Kshitij Anand.
Q: What is your outlook for this week, any important levels that investors should track?
A: Nifty was very volatile in the last week as the index witnessed profit taking near resistance levels around 11,950-12,000.
Still, the major trend is bullish and the minor trend for Nifty is sideways. For next week, the Nifty is expected to consolidate in the range of 11,750-12,000.
If Nifty stays above 11,800 then the market will trade with positive bias but if it breaches 11,750 then Nifty may move towards 11,600 and can even test 11,420 in the next couple of weeks.
Q: Are there any stock that has seen bearish crossover?
A: If Nifty closes below 11,800 then traders should liquidate their long positions and look for going short on every rise.
Axis Bank, Bajaj Finserv, HDFC, HDFC Bank, DCB Bank, Hero MotoCorp, Kotak Mahindra Bank, LIC Housing Finance, Coal India, Repco Home Finance, Hexaware, Torrent Pharma, Sun TV, Escorts and DLF are some stocks that have given bearish crossover recently.
Q: Do you think there is more pain is in store and traders should stay with quality largecaps?
A: The market breadth is a matter of serious concern for any substantial rise from these levels. The recent results from the majority of sectors were below market expectations.
Going by valuations, based on future earnings expectations, the broader market does not look as attractive as they were a couple of months ago.
Yes, the formation of ‘Golden Cross’ is indicating a possibility of a more inclusive bull market but it should be seen in conjunction with other indicators.
I think for traders it is better to lighten their long positions and wait for this market to consolidate. Yes, quality largecaps will be safer bet compared to midcaps until the Budget or until the Nifty is trading below 12,000.
If the Nifty starts closing above 12,000 then the mid and smallcap segment will start outperforming the largecaps.
Q: Mixed economic data failed to pull down markets lower. Do you think the rally could extend beyond 12,103 in the run-up to the Budget?
A: The market has ignored almost all indicators of the slowdown in the economy till now. The market's sensitivity towards positive news may take it beyond 12,103 on any signs of subsiding global tension between US-China or rate cut by the Federal Reserve.
The expectation of an increase in government expenditure, to revive the economy, in the coming budget may help the market to rebound fast to recent highs.
So the possibility of this rally to extend beyond 12,103 is certainly there but its sustainability at that level is doubtful by looking at the dismal data pouring in. I expect the market to trade in a broad range of 11,600-12,000 till Budget.
Q: How can traders or investors do ‘trade management' effectively?
A: For retail traders and investors, the first and foremost goal should be to survive the volatility of the markets and keep their losses limited as their capital is very limited compared to institutions.
Trade management covers finding a set-up, determining allocation size and planning out the trade, then executing entry, monitoring and exits.
A lot of retail traders and investors focus only on choosing right stocks and price to enter but largely ignore or undermine the importance of other critical aspects like allocating optimum amount per trade, multiple entry and exit points, stop loss and its revision, profit booking levels.
Writing a plan in detail with different what-if scenarios and executing it with perfection is the first step for successful long-term trading. Avoiding compulsive trading and impulsive decisions can save most of the bigger drawdowns of capital.
Q: What are the important events to watch out for this week?
A: The expectation of a rate cut by the Federal Reserve in the coming week is fueled by weak economic data and tariff war with China.
But, the gain witnessed in May retail sales data declared last week may result in the postponement of any decision for rate cut immediately and that will disappoint the markets.
The next big event for the coming week is the G-20 summit and the possible meeting of Trump and Xi Jinping on tariff war. This uncertainty in global markets and news of an overall slowdown in major economies will keep the traders and investors on their edges.
Crude oil was moving south on the back of a decrease in demand but recent attacks on oil tankers in the Middle East will escalate tensions.
Any substantial increase in crude price will affect the Indian markets adversely at this point. If crude sustains below Rs 3,530, it could test the Rs 3,350.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.