Rajesh Palviya, VP-Technical & Derivative Research, Axis Securities, thinks that the Nifty IT, which is trading at an all-time high, still has some way to go. He says another 5-8 percent up move is likely in the short term.
In an interview to Moneycontrol’s Kshitij Anand, Palviya says capital goods will continue to have good traction and may gain another 4-5 percent in the near term. Edited excerpts:
The bears tried to take control in the week gone by but buying at lower levels helped the bulls to stay put. What led to the price action on D-Street?
At the beginning of the week, we saw a gap-down opening due to the hawkish commentary by the US Federal Reserve. But, looking at the domestic markets, faster than expected economic recovery gave the bulls some confidence and we saw the Nifty index recapturing the 20-day SMA (short-term moving average).
IT, metals and banking were among the strongest sectors that contributed to the run-up.
Small and midcaps witnessed some consolidation. Are high-beta plays at risk considering the selling by FIIs?
Small and midcap index is holding its strength on short to medium-term chart and quality midcaps are showing good buying action. The delivery volumes are also suggesting increased participation.
FIIs have booked some profit but the overall FII flows are on the buying side. The Nifty50 is holding above its short-term breakout levels, so as such there is no risk to high beta stocks and one can continue to hold the positions.
We expect a renewed buying action once the Nifty50 manages to cross above 15,900 levels.
The Nifty closed the June series 3 percent higher. What are your estimates for the index, major levels to watch out for?
In the June series, the Nifty witnessed a rollover of 84.61 percent compared to 77.28 percent, shedding 7.51 lakh shares with price gains of 2.95 percent (453 points) and started the July series with OI of 97.22 lakh shares compared to 104.73 lakh shares in June expiry, indicating lower leveraged positions carry forwarded even though its higher in percentage term.
The monthly option data at the start of July expiry shows high OI concentration at 16500 Call (17.13L) & 16000 Call (16.73L) strike, pointing towards important resistance zone; while the same on the Put side is seen at 15500 Put (25.99 lakh) & 15000 Put (24.61 lakh), indicating a probable support level for this expiry.
The overall range for the July series is at 16,000– 16,500 on the upside and 15,500–15,300 on the downside, with intermediate levels of 16,200 and 15,200, respectively.
RIL was the big event in the week gone by. How is the stock looking on charts and the near-term target for the stock?
Reliance Industries witnessed profit booking last week and slipped below 20-day (SMA), which indicates that the stock may face some more pressure in the near term, however, the stock is in a bullish zone for the long term.
One can use dips as a buying opportunity. The daily chart pattern suggests that the stock has important support around the 2050 level, however, on the higher side, 2,150 -2,200 are the resistance area.
Once the stock manages to cross above 2,200 levels, it may regain strength on the near-term chart and can scale up further towards 2,250-2,300 in the short term.
Sectorally, IT and capital goods stocks were the top gainers. What led to the price action?
IT large-cap stocks like TCS and Infosys have shown good buying and managed to give a breakout on near-term charts. The midcap IT stocks like Coforge, Mphasis, Tech Mahindra and MindTree have also done well in the last few trading sessions.
The Nifty IT is trading at an all-time high level and we expect the IT sector to do well in the near term. We could see another 5-8 percent up-move in the short term.
The capital goods sector has gained around 4 percent during the week and witnessed short-covering action. We have seen good buying action in stocks like L&T, BEL, Havells India and Cummins India.
We expect that the capital goods sector may continue to show good traction in the near-term basis. We could witness another 4-5 percent up move in the near term.
Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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