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MC Interview | Bullish trend in Bank Nifty likely to continue but IT may see more weakness, says Rajesh Palviya of Axis Securities

Rajesh Palviya of Axis Securities says Nifty is well placed above its long term moving averages of 100 daily moving average and 200 DMA. And more than 50 percent stocks of NSE500 are now trading above 200 DMA which indicates strength in medium-long term.

August 31, 2022 / 07:20 AM IST

Bank Nifty managed to give breakout to its falling trend line on the monthly chart and sustaining above all its important moving averages suggests bullishness in the short-medium term, says Rajesh Palviya of Axis Securities in an interview to Moneycontrol.

Further, Bank Nifty has witnessed Golden Crossover (50 DEMA given upward crossover to 200 DEMA) in August which indicates bullish trend is likely to continue further, adds Palviya, with 13 years of experience in equity markets.

The vice president of research (head technical and derivatives) at Axis Securities says despite recovery from lower level, Nifty IT is still not able to sustain above near term moving averages like 20, 50 DMAs (daily moving averages) which indicates more weakness ahead.

Most largecap IT stocks are trading below their near term moving averages.

Considering the gradually changing market mood, do you think Nifty50 is ready to reclaim the 18,600 mark well before Diwali?

Close

Macro factors continue to influence the market. We believe that the worst of the FIIs (foreign institutional investors) outflow is behind us and the buying trend is likely to take place in the upcoming month with some inflows already visible in July and August 2022. Cool-off in key commodity prices coupled with the central bank's actions on front-loading the interest rates has changed the market style in the last one month.

Nifty is well placed above its long term moving averages of 100 DMA and 200 DMA. And more than 50 percent stocks of NSE500 are now trading above 200 DMA which indicates strength in medium-long term. Nifty has given the breakout of it down sloping channel in the month of July and sustaining above that indicates gaining strength.

Weekly and Monthly RSI (relative strength index) is in bullish zone indicating Nifty is likely to continue its uptrend in coming months.

Chart pattern suggests if Nifty manages to cross 17,950 levels, it may scale up to 18,450-18,600 in short term. However, on the downside, 17,300-17,000 are likely to act as good support.

What are the charts of Nifty Bank telling you? Will the index surpass its record high levels before Diwali?

BankNifty manages to give breakout to its falling trend line on monthly chart and sustaining above all its important moving averages suggests bullishness in short-medium term. BankNifty has witnessed Golden Crossover (50 DEMA given upward crossover to 200 DEMA) in the month of August which indicates bullish trend is likely to continue.

Weekly chart indicates if BankNifty manages to cross 40,000 level then it may scale up towards 40,900-42,000 (new all-time high) in coming months. However, on the downside, 38,500-37,700 are major support levels in minor corrective action.

Nifty IT remained the biggest loser among sectors. After the formation of Double Bottom, the index has been consolidating for a couple of months now. Do you think the index is preparing ground to make a significant move in the coming months?

IT companies are witnessing a fall in the stock market mostly because of supply-side pressures and fall in demand amid macro headwinds in western countries. Despite recovery from lower level, Nifty IT is still not able to sustain above near-term moving averages like 20, 50 DMAs which indicates more weakness ahead.

Most largecap IT stocks are trading below their near term moving averages. Chart patterns indicate till Nifty IT crosses 29,500 level, it will remain weak and may witness supply pressure on the higher side; however, if it crosses 29,500, it may go higher towards 30,500-31,000. We expect Nifty IT to remain in consolidation mode for some more time with downward bias.

The Smallcap index is far away from its record high levels compared to Midcap and benchmark indices. Do you expect a lot of catch-up in Smallcap index in coming months and will it surpass record high levels by March FY23?

Nifty Midcap recovered sharply in the last two months sustaining above all its important moving averages. Midcap index recovered to its April 2022 high and is showing strength in near/short term charts. We expect Midcap index to likely exhibit its bullishness further.

SmallCap index recovered significantly from its recent low and is now sustaining above 100, 200 DMAs which indicates regaining strength. Strength indicator RSI is showing bullishness on daily and weekly charts.

Chart pattern indicates if Smallcap index manages to cross 9,630-9,800 Bearish gap area, then we can see a fresh round of buying which could lead index towards 10,500-11,000 in coming months.

Do you think the rupee is moving towards 82 levels in the near term?

Dollar Index is testing 20 year high, but USD-INR has not seen an upside thrust. This could be due to unwillingness of the FPI (foreign portfolio investor) to sell Indian assets holding and also the central bank being active in its intervention. Oil prices have also failed to boost the pair as Brent crude is trading at $103 a barrel.

Furthermore, a possible 75-basis-point hike at the next ECB (European Central Bank) meeting was hinted at by official comments. Technically, 80.25 on the spot has been a hard nut to crack as the pair has made multiple failed attempts to break above resistance and momentum indicator RSI is also showing a drop in momentum.

On the other hand, hawkish comments from the Fed chief and US Treasury two-year bond yields hitting a 15-year high may see upward drift in USD-INR but the pace of the upside move can be sluggish due to above factors. Once the pair breaks above the high of 80.25, the next levels to look out for would be 81 and 82 but again a sharp move towards the respective levels would be a rare event considering all the above aspects. The upward projection remains intact till 78.30 is not broken on the downside.

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.
Sunil Shankar Matkar
first published: Aug 31, 2022 07:19 am
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