The chart pattern suggests that if Nifty crosses and sustains above 11200 levels it would witness buying which would lead the index towards 11400-11600 levels, Rajesh Palviya, Head - Technical and Derivative Research, Axis Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:Q) It was a volatile week for Indian markets. Nifty50 failed to hold on to 11,300 levels. What led to the sell-off on D-Street?
A) The market has shown over 7 percent upward move in July. The market has extended its gain for the fourth consecutive month, forming a higher high.
The market has shown a strong run-up in the last 3-4 months. The index failed to cross the 11300 levels and witnessed profit booking at higher a level.
The market witnessed volatility as most of the frontline companies are coming out with their financial results. Global uncertainty also added to the volatility in the market.Q) Which are the important levels that one should keep an eye on in the coming week? And, what should be the strategy?
A) On the weekly chart, the index has formed a Bearish candle with an upper shadow, indicating selling at higher levels.
On the daily chart, the index is consolidating within the range of 11350 – 11000, indicating a sideways trend.
The chart pattern suggests that if Nifty crosses and sustains above 11200 levels it would witness buying which would lead the index towards 11400-11600 levels.
However, if the index breaks below 11000 levels, it would witness selling which would take the index towards 10700-10500. The Nifty is trading above 20 and 50-Day SMA's which are important short term moving averages, indicating a positive bias in the short term.
The Nifty is expected to remain in an uptrend to sideways zone until it breaks 10500 on the downside. For the week, we expect Nifty to trade in the range of 11400-10700 with a mixed bias.
The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating a positive bias. However, the momentum oscillator Stochastic has turned negative from the overbought zone, indicating a possible consolidation or a down move in the near term.Q) Based on the July expiry where do you see Nifty heading in the August series. Do you think we could make an attempt towards 11500? Or we could correct towards 10500 levels?
A) The Nifty50 rollover in the July series stood at 77.59 percent compared to 78.93 percent marginally down by -1.70 percent, while in absolute terms there was a decrease of -2.37 lakh shares( from 114.05 lac to 111.68 Lac) in the open interest with an increase in the price of 7.9 percent, indicating that it was a short covering.
The sentiment indicator PC Ratio had made a high of 1.90 in July series near the expiry week also hinting towards more of cautiousness at higher levels further augmenting the view of short covering in July series.
The current PCR is at 1.31 which is well above the centre line indicating caution at higher levels. The highest OI on the CALL side at the start of July expiry was on 11,000 & 11,500 while in the August series it’s at 11,500 & 12,000 hinting 11,500 as a strong & important resistance zone.
Similarly, on the PUT side, the highest OI in the current expiry is placed at 11,000, followed by 10,500. India VIX is currently at 24.19 percent and has been in a downward trajectory from its recent high of 35 percent; however, it has been unable to breach the 22-21 level and is acting like a support level and an up move from these levels might indicate some selling or profit booking from current levels in Nifty.Q) More than 100 stocks in BSE 500 index rallied 10-50% amid positive close seen in the benchmark indices in July month. In the Smallcap index, the number is close to 160 which rose 10-100% in the same period. It looks like select small & midcap stocks are attractive buyers’ attention.
A) Midcap and small-cap stocks generally perform in healthy market conditions, and for the last three months, we are in a positive trend and witnessing good momentum.
We expect the Small-cap and mid-cap stocks to perform further as benchmark index Nifty is in a bullish zone and trading above 200-DMA.
We suggest one should keep booking profit also on rallies. However, some quality mid-cap and small-cap can be added in the portfolio which has shown consolidation in the last two-three months and holding above their 200,100-DMA levels.Q) Sectorally, IT, Energy, and Healthcare stocks were the top sectors in July? A lot of stocks in the IT space hit a fresh 52-week high. What is the leading rally in these sectors?
A) In the last two-three months, we have seen IT, Pharma & Healthcare sector outperform to the benchmark indices and the stocks have shown a good run-up.
Both the indices are trading above all its important moving averages and shown breakout on medium-term chart.
Looking at the sector's constituent, we believe quality stocks continue to show bullish momentum in the coming weeks.
From the IT sector, we expect TCS, Infosys, and Wipro and from Pharma pack, we like Dr. Reddy’s Laboratories, Divis Laboratories, and Sun Pharma continue to show bullish momentum in the near termQ) What are your top 3-5 trading ideas for the next 3-4 weeks?
A) Here is a list of top 4 ideas that could give 8-11% return in the next 3-4 weeks:Aarti Industries Ltd: Buy| LTP: Rs 990| Buy Range: 990-970| Stop Loss: Rs 950| Target: Rs 1040-1070| Upside 8%
The stock has given a multi-day breakout from a “Rounding Bottom” formation, indicating buying at lower levels.
The daily strength indicator RSI continues to maintain its bullish momentum, indicating a sustained uptrend. The stock is trading above all major moving averages (20, 50 & 100 SMA) indicating a sustained uptrend.Dabur India Ltd: Buy| LTP: Rs 513| Buy Range: 512-502| Stop Loss: Rs 490| Target: Rs 540-555| Upside 8%
The stock has given a “Symmetrical Triangle” breakout and is also trading near three month high, indicating strong confidence by the bulls.
The stock has also managed to take support from the 50-day SMA which indicates that the stock should be bought on any dip towards the 50-day SMA.
The weekly strength indicator RSI has given a bullish crossover on a daily timeframe, indicating that bulls are in controlBalkrishna Industries Ltd: Buy| LTP: Rs 1322| Buy Range: Rs 1320-1295| Stop Loss: Rs 1258| Target: Rs 1410-1455| Upside 10%
The stock has decisively broken out from a “Consolidation Range” indicating a stronger comeback by the bulls.
The daily strength indicator RSI continues to remain in an uptrend and stochastic has given a bullish crossover indicating bullish momentum. The stock has managed to recapture the 20-Day MA, indicating a sustained uptrend.
The stock has closed above the upper Bollinger band indicating bullish sentiments going ahead.
Sun Pharmaceutical Ltd: Buy| LTP: Rs 531| Buy Range: 535-525| Stop Loss: Rs 507| Target: Rs 575 – 590| Upside 11%
The stock has broken out from a multi-month resistance near 510 levels indicating increased participation by the bulls.
The daily strength indicator RSI continues to maintain its bullish momentum indicating a sustained uptrend. The stock has also closed above the upper Bollinger Band indicating positive bias going ahead.
The stock is trading well above all the major moving averages (20, 50 & 100 SMA) indicating a sustained uptrend. Strong volumes at breakout levels are further confirming our bullish thesis.Disclaimer
: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.