Mazhar Mohammad, Founder & Chief Market Strategist at Chartviewindia.in feels Bank Nifty is looking very interesting with new highs and a channel breakout which has opened up a higher technical target of 42,000 levels. "Better trades with 2 digit gains which may come from banking space especially PSU Banks if Bank Nifty sustains above 40,000 levels," he said in an interview to Moneycontrol's Sunil Shankar Matkar.
On the Nifty50, according to him, a close below 17,900 on the Nifty can trigger a much awaited downswing which can lead to 10-15 percent correction.
Q: Do you think the Nifty can hit 19,000 mark by Diwali after current correction and consolidation?
Medium to long term trend of Nifty is still favouring bulls as momentum backed by liquidity is very high and clearly positively biased in favour of bulls. However, recent sharp correction from the highs of 18,600 appears to have breathed some life into the bears. Nevertheless critical support for this index is placed around 17,900 levels and unless that is broken on a closing basis there still remains a fair chance for bulls to make a comeback.
In that scenario if Nifty manages to get past 18,600 levels then 19,000 can be expected. However, a close below 17,900 can trigger a much awaited downswing which can lead to 10-15 percent correction. As on today if you want me to come out with a downside target for Nifty, on breakdowns, then that will be around 16,870.
Q: Bank Nifty finally crossed the 40,000 mark. Do you expect it to cross the 45,000 mark in a month or so?
As Bank Nifty remained an underperformer for a long time, we believe that it is only a catch up play. So, in case if markets tumble down then it will slip back into an underperforming phase. Meanwhile a noteworthy point about Bank Nifty is the fact that it is moving inside a well defined channel for the last 41 trading sessions and seems to have broken out of that in last session.
Going forward it needs to sustain above the said channel by consistently trading above 40,000 levels. In that scenario, we have a technical target of 42,000 as on date whereas on the downsides, 39,290 should remain critical support. However, to answer your question of 45,000 that possibility can't be ruled if the current breakout proves to be a stronger one.
Q: What are the sectors which can be in the limelight next week, and why? Also technically what are the sectors that one should stay away from, for the time being and why?
Bank Nifty is looking very interesting with new highs and a channel breakout which has opened up a higher technical target of 42,000 levels. Hence better trading opportunities shall arise from this space. Besides this, all other indices have seen some kind of damage but IT seems to be in a sideways consolidation. Therefore as long as this counter sustains above 34,700 levels some trading opportunities can be isolated from this sector.
Considering disappointing results of Asian Paints, muted response on bourses to HUL results and negative news flows surrounding ITC one can consider avoiding FMCG sector as this index witnessed a price damage of 6 percent last week. Though the BSE Real Estate index is up by around 2.5 percent in the last session this index is still down by around 4.7 percent when compared to last week. So if this index sustains above last Thursday's low of 3,832 levels then some trading bets can be isolated from this space too. Metals which are down by 5 percent, week-on-week, should be avoided.
Q: Broader markets fell quite sharply in recent corrections. Is it the time to adopt a buy on dips strategy or stay away for the time being?
Recent flash crashes in counters like IRCTC can be the best example of what will be in store if one chases vertical rallies out of greed. As we are all aware of the vertical rise of indices in the last 18 months without meaningful correction it is certainly time for caution rather than looking to buy everything under the Sun with every dip. Nevertheless, at this juncture, some compelling stock specific stories can be looked at for the long term by making use of such corrections.
Q: Can you name a few stocks that look attractive at current levels and can give double digit returns in a month or so? Can you explain technical reasons that can support your advice?
At this point in time we are not comfortable to come out with a multi-month positional trade as Nifty is precariously poised. Correction going forward can be deep and shall get further accentuated if Nifty closes below 17,900 levels. Nevertheless, better trades with 2 digit gains which may come from banking space especially PSU Banks if Bank Nifty sustains above 40,000 levels.
Q: What should investors do with Reliance Industries, Yes Bank and ICICI Bank on Monday?
Reliance Industries price move in the next session is bound to be influenced by the investor perception based on the results outcome. Nevertheless, technically speaking, price behaviour of the last two weeks is looking weak and precarious with indecisive formations. Hence, in the next session if it slips below Rs 2,600 levels then correction shall get accelerated. However, post results if it manages to sustain above Rs 2,600 levels then sideways consolidation in a range of Rs 2,750 – 2,600 can be expected.
Also read - RIL Q2 Result: Profit jumps 46% to Rs 15,479 crore; all businesses witness growth over pre-COVID levels
ICICI Bank is moving in a well defined ascending channel for the last 24 weeks. Hence, it is in need of a fresh breakout above Rs 764 levels. On such a breakout a higher target of Rs 820 can be expected. For time being investors who already own this counter shall hold with a stop below Rs 753 on closing basis whereas a fresh breakout above Rs 764 can be a good opportunity for fresh entry.
Also read - ICICI Bank Q2 Result | Profit grows 30% to Rs 5,511 crore, net NPA lowest since December 2014
In our opinion, Yes Bank is only a contra opportunity with expectations of complete turnaround at some point in future. Therefore retail investors should look for better opportunities available elsewhere in the banking space.
Also read - Yes Bank Q2 results: Profit jumps 74% to Rs 225.50, NII declines 23%
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