MC Interview: Nifty may find it hard cross 25,000, but rally likely to continue in IT, FMCG indices, says Milan Vaishnav

There are Yes and No for this. The markets are trending higher; as of now they show no signs of any weakness. However, we cannot also ignore and overlook the fact that the markets stay highly overextended and remain significantly deviated from the mean. From a technical perspective and going by the derivatives data, the level of 25,000 can get tested but there are very less chances that the Nifty will climb and move beyond the 25,000 level.

What is your trading strategy for the index given the overbought conditions?

I would stick to my basics; given the current uptrend, of course I will keep following the trend. However, at the same time, I would effectively trail my stop-loss in a way that if they are triggered then I am able to protect the bulk of my profits. Also, I would focus more on guarding profits at current levels and will keep fresh buying limited to those stocks that show improving relative strength and promising technical structure. I would avoid giving a blind chase the the stocks that have already moved much ahead of their curve.

Do you expect the Bank Nifty to see a breakout for a target of 53,000 after current consolidation?

Bank Nifty remains relatively weaker; the pattern support is at 52,050. If this is violated, we may see some incremental weakness in this pocket.

Having said this, the last phase of the upmove in Nifty Bank Index had come with a strong bearish divergence of the RSI (Relative Strength Index) against the price. This makes the level of 53,000 an immediate top for the index. This level may get tested if there is a strong move but it is unlikely that this will get taken out soon.

Do you think the Nifty IT is soon going to see a big rally?

Yes, I definitely think so and I have multiple reasons to support my view. From a short-term perspective, the Nifty IT Index has seen a sharp improvement in its Relative Momentum when benchmarked against the broader Nifty 500 Index. With the Index rolling inside the Improving Quadrant of the RRG (Relative Rotation Graphs), it is likely to improve its relative performance against the broader markets.

Furthermore, the recent rally has taken the index to its recent highs; but it has also seen retesting the levels that were seen earlier in 2022. Above 39,500 level will lead to a multi-year breakout in this Index. Some consolidation cannot be ruled out but eventually Nifty IT Index is staring at a major breakout.

Will the rally continue in Nifty FMCG which recently saw a breakout?

Yes, the rally is expected to continue in Nifty FMCG; this would be more likely if the markets in general show some signs of consolidation. Otherwise, the index is a bit overextended on both daily and weekly charts. However, while some consolidation cannot be ruled out, the rally can definitely extend itself as the primary uptrend stays very much intact.

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