The sheet anchor 200-day simple moving average is placed around 10,820 – 10,770 but it will probably be broken and head towards the next cluster of support at around 10,600–10,450, Sameet Chavan, Chief Analyst Technical and Derivatives, Angel Broking Ltd, says in an interview to Moneycontrol’s Kshitij Anand. Edited excerpts:
Q) The Nifty struggled to hold on to 11,000 but found some support near 10,800 levels. What led to the price action or scared the bulls?
A) We had a couple of hints in the previous three weeks but those who ignored them had to pay the price. Initially, (it was) the aggravation of India-China tensions at the border which followed by strong profit-taking is US markets, mainly led by Nasdaq after a gravity-defying rally.
Hence, the uncertainty was clearly looming over our market, which finally triggered a correction after the upsurge in the US dollar index, which was in the process of forming a base for a few weeks.
Sectorally, the weakest banking space was the major culprit, which was followed by a broad-based selloff. In fact, one of the major leaders, IT, also succumbed to it in the latter half.
Q) Looking at the September expiry data, how will the October series play out for investors? What are the important levels to track?
A) During the series, we saw long unwinding in the Nifty but the banking index witnessed short formation, which led to its underperformance and it registered a loss of over 13 percent.
The rollover in the Nifty is at 70.6 percent which is lower than its average of 76 percent. The rollover in the Bank Nifty is at 79 percent versus its average of 77 percent.
This indicates that shorts in the banking space have been rolled into the October series. FIIs started the September series with a good amount of long positions but as the series progressed, they unwound their longs and formed shorts too. Their ‘Long Short Ratio’ at the start of the new series is at 44 percent.
We could see some higher volatility at the start of the series and at least in the first half, the selling is likely to re-emerge on the pullback move towards 11,150 – 11,250.
Although the sheet anchor 200-SMA is placed at around 10,820–10,770, we expect it to be broken and then probably head towards the next cluster of support around 10,600–10,450.
Q) Selling was seen in telecom, realty, and auto space while the IT sector bucked the trend. What led to the price action?
A) Clearly, it was a broad-based selloff and the high beta spaces have been hammered brutally. As we just alluded to in the above section, IT also had to succumb to this in the latter half to some extent.
Yes, it bucked the trend initially and showed some resilience but it seems that the recent euphoria in this space has been dented too.
Q) Is it a good time for investors looking to deploy the cash or should they wait for some more correction before buying?
A) Although we are sounding a bit cautious, we believe that the ongoing correction is likely to provide better opportunities for investors to grab the quality propositions at lower levels.
One can never be able to catch the absolute bottom and hence, for investors, it’s always advisable to latch on to their desired stocks in a staggered manner in such corrective phases.
Q) Any three-five short-term trading ideas for the next 3-4 weeks?
A) For a slightly broader perspective, from the larger peers, we advise buying L&T, Maruti Suzuki and Tata Steel in a staggered manner and a couple of smaller names like Quick Heal and Jamna Auto.
However, momentum traders can look to sell TCS, UPL and Jubilant Foodworks on a bounce back from current levels.Disclaimer: The views and investment tips expressed by 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.