Even amidst a record-high rally in the market, Rohit Srivastava of Indiacharts maintains that the fall in some of the index heavyweights should not be perceived as the pin that bursts the bubble. In an exclusive interview with Moneycontrol, he highlighted the overall market structure and the impressive development of the rally since March, suggesting that this particular surge is far from complete.
Srivastava is an Elliott Wave analyst. Elliot Wave theory is a sophisticated wave pattern recognition theory that helps analyse market movements and identify the stages in a market cycle. “Looking at the way the map is unfolding, we are not getting a clue of another pause yet. It could happen at some point in time,” said Srivastava.
Also Read: HDFC Bank expects 17-18% credit growth this year
According to him, recent market movements have shown that if there is any pullback in the market, it ends up being only for one to three days, and stocks are not falling below the daily moving averages. “Even right now, at the most, you can pull back and retest the last two, three days’ lows and then probably continue higher all over again.” Said Srivastava.
After touching a new high of 19,969 on Thursday last week, the Nifty closed the week at 19,745 dragged down by index stocks, particularly tech, and HUL, that posted quarterly numbers worse than analyst expectations.
Notably, HUL posted a 10% decline in net profit for the quarter, sequentially. Volume growth stood at 3% on a y-o-y basis compared to an expectation of 7%. Infosys revised its revenue guidance for FY24 to 1% to 3.5%, sharply lower than the growth posted last fiscal.
“It gives me a deja vu moment; in April 2002, when Infosys downgraded its earnings, it hit the lower circuit, and that ended up being the lowest point for the stock for the next decade.” Srivastava. “We're asking ourselves, is this a similar moment because bad news never comes at the top, it always comes at the end of a down phase, and we've actually had a long down phase for the Indian IT sector.”
Also Read: HDFC Bank expects 17-18% credit growth this year
Srivastava also said that the weakness in Reliance Industries stocks may be because of investors taking some gains off the table after the de-merger of Jio. “Reliance Industries has broken out from a downward slanting channel which was in place for the last one to one and a half year when it was underperforming the Nifty. This breakout is usually not something that just ends in a few days. It's something that can last for weeks or months. It's a very important breakout that has happened, and therefore, whatever profit booking we are seeing might just be temporary.” Said Srivastava.
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