From a medium-term perspective, Ajit Mishra, vice president of research at Religare Broking, says there are two critical levels to look at on the Nifty50 -- 15,500 and 16,500.
"A decisive close above the upper band i.e. 16,500 on the weekly basis would strengthen bulls and help the Nifty towards 16,800 or higher. On the flip side, a breakdown below 15,500 would again fuel negative momentum, with immediate support at 15,200 and then finally at 14,500 levels," he added.
Within the energy pack, Mishra feels stocks related to gas and power distribution are better placed. Edited excerpts:
Do you think chart patterns (daily, weekly, monthly) are suggesting another round of deep correction in the Nifty50 in coming weeks before marching towards previous record high levels?
I am an avid believer in following the trend and the prevailing trend is still down. Broadly, the Nifty has been witnessing correction since October 2021 while trading in a descending broadening formation. And the lower range of the chart pattern currently lies around 14,500 zone. Having said that, the pace of decline has reduced substantially with a rebound in global markets and we’re seeing intermediate rebounds as well.
From a medium term perspective, we have two critical levels to look at - 15,500 and 16,500. A decisive close above the upper band i.e. 16,500 on the weekly basis would strengthen bulls and help the Nifty towards 16,800 or higher. On the flip side, a breakdown below 15,500 would again fuel negative momentum, with immediate support at 15,200 and then finally at 14,500 levels.
Amid all uncertainty, select sectors like auto and FMCG (fast moving consumer goods) are performing well so the prudent approach is to focus on identifying themes and position trades accordingly.
Power is the biggest gainer in the last nine months. Do you expect the rally to continue or is it profit booking time?
The surge in the BSE Power index has been phenomenal as it also made a new record high recently after 14 years. After a marginal dip, it’s again inching higher. Indications favour some consolidation in the index so participations should maintain a stock-specific trading approach.
Among constituents, ABB, Siemens and Adani Transmission are trading at their record highs and looking firm on charts. Besides, NTPC and Tata Power are also seeing traction after the marginal dip.
What are the midcap and smallcap charts telling you now?
Broader indices, both midcap and smallcap, have also been in a corrective phase since October 2021 in line with the benchmark. However, the midcap index is outperforming the Nifty and the smallcap index in the recent rebound and trading up by nearly six percent this month so far.
Going ahead, the midcap index could strengthen further if it regains 28,250 while the journey for the smallcap index looks tough due to multiple hurdles at 9,050 and 9,350 levels. We thus advise maintaining caution and buying selectively in the midcap and smallcap spaces.
Do you think selling is over in the metal space and it is the time to buy these stocks, as the metals index has fallen 25 percent in the last nine months?
The metals pack is still reeling under pressure despite oversold positions and we feel it's prudent to wait for some reversal signal before initiating any fresh long trades. In fact, traders should look for shorting opportunities if the market witnesses any correction ahead.
Do you expect the IT index to consolidate for a few more weeks before the beginning of a new bull run. Also, are you a buyer in the space?
In line with the metals space, the IT pack is also seeing selling on every rebound and a sharp cut in the last week has pushed the index to a newer low. The IT index has immediate support at 25,200 level and major around the 24,200 zone, which shows there is still room for further downside. On the flip side, a close above 28,500 zone would negate this view.
Amid all, participants can consider nibbling selectively as some stocks, especially from the midcap IT space like L&T Infotech and Mindtree are showing resilience in the recent fall as they're trading at their major supports and might bottom out first in case of recovery.
What are the oil charts indicating now as oil prices cooled down considerably?
Earlier, oil exploring companies were doing well while oil marketing companies (OMCs) were witnessing pressure. However, now both are on the same side. Though we might see some rebound in oil related counters due to oversold positions, we feel stocks related to the gas and power distribution are better placed within the energy pack.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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