The Nifty IT index is trying to create a base around the 26,200 level, but there is still a risk of another 10 percent fall in the benchmark of information technology before it reverses, says Santosh Meena of Swastika Investmart.
A further 10 percent fall will complete a 50 percent retracement of the post-COVID rally, Meena said in an interview to Moneycontrol.
The IT index is one of the biggest laggards this year, trading almost 30 percent lower from its all-time high. The Nifty CPSE index is heading higher on the back of buying in defence and power stocks.
The overall structure looks bullish in the CPSE space so any correction towards 2,650-2,600 will provide a buying opportunity, said Meena, head of research at Swastika Investmart with more than 10 years of experience in financial markets, and with expertise in technical and derivative analysis.
Technically, are the charts and patterns indicating the Nifty moving towards its record high in the coming weeks? Also, what is the option chain and PCR data indicating about the Nifty50?
The overall structure is bullish but in the short term there is a double top formation around the 18,000-18,100 zone with a bearish divergence in RSI (relative strength index), therefore, we are seeing profit booking at higher levels.
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On a weekly time frame, Nifty witnessed a Bearish Engulfing candlestick formation, which is a sign of caution (signalling lower prices ahead). On the downside, 17,500-17,300 are immediate and strong support levels while 17,150-17,000 is a sacrosanct demand zone at any meaningful correction.
The 17,150 is a previous swing low while 17,000 is a 200-DMA (day moving average) for the Nifty. On the upside, if Nifty manages to take out the 18,100 level, then a move towards all-time high can't be ruled out ahead of Diwali where 18,350 will be an intermediate hurdle.
The Put-Call ratio (a measure of the market’s mood) has slipped to an oversold level of 0.76, therefore there is a probability of a bounce-back from the 17,500-17,300 zone. If we look at the option chain of September month expiry, then the highest open interest is placed at 18,000 Call strike and 16,500 Put strike prices; however 17,500 has the second highest open interest as an immediate support level.
Technically, are you bullish on the IT space that has been volatile since the start of the calendar year?
IT index is one of the biggest laggards this year, which is trading almost 30 percent lower from its all-time high. It is trying to create a base around the 26,200 level but still, there is a risk of another 10 percent fall before it reverses because after a 10 percent fall it will complete a 50 percent retracement of the post-Covid rally.
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IT stocks may see recovery soon, but that recovery won't be sharp; however, investors can start to accumulate good quality stocks in this space as risk-reward is favourable because IT stocks have to recover if the Nifty has to go to a lifetime high.
What is your strategy in the Nifty CPSE index?
Nifty CPSE index is heading higher on the back of buying in defence and power stocks; however, 2,800 is a critical and multi-month resistance level where we can expect some profit booking but if it manages to close above 2,800 level then we can expect fresh buying momentum in PSU stocks.
The overall structure looks bullish, therefore any correction towards the 2,650-2,600 area will provide a buying opportunity.
Will the Bank Nifty hold the 40,000 mark going ahead? Do you see the index moving beyond 45,000 in the current financial year?
Bank Nifty has leadership in its hand and already hit its lifetime high of 41,840. The leadership is likely to remain intact. however, some profit booking can't be ruled out if global cues remain sombre.
On the downside, the 40,000-39,000 zone will act as a strong demand zone at any correction whereas there is a good chance that we may see the level of 45,000 in Bank Nifty in this financial year.
What is the option chain and PCR (Put-Call ratio) data indicating about the Bank Nifty?
If we look at the derivative data of Bank Nifty then despite a big rally this month, the Put-Call ratio is at an oversold level of 0.79. Option chain data are scattered where the highest open interest on the Call side is placed at the 43,000 level while the Put base is placed at the 40,000 level.
Is the USD-INR chart indicating that the rupee will depreciate to 82 levels?
The Indian rupee also remained resilient despite lots of headwinds where the 80.2 level is acting as a strong support; if that level is broken, then we can expect further weakness towards the 81 level while it is early to say that it may head towards the 82 level. If it doesn't slip below the 80.2 level, then it may strengthen to a level of 77.5.
Technically, do you see any chance of oil prices moving towards $70 a barrel levels in coming weeks?
Crude oil is witnessing a correction after boiling up in the initial months of 2022 where it may see more correction, but it is early to say that it will head towards the $70 a barrel level because $87 a barrel is an immediate and strong support level for Brent crude while $81-77 will act as a strong demand zone at any meaningful correction. Upside also looks restricted in $105-110 zone.
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