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RBI meet, state election results likely to keep Nifty volatile in December

In the short-term, traders can remain positively biased as long as Nifty50 sustains above its 200-day moving average whose value is placed around 10,744.

December 03, 2018 / 08:35 AM IST
 
 
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After December, mother of all elections i.e. general election is lined up in May. So, no investor will like to commit big money ahead of such uncertain event, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said in an interview with Moneycontrol’s Kshitij Anand.

Q. We witnessed a strong November expiry and a steady rollover towards December series. Do you think we are on track to hit 11K?

A. See, 11,000 on Nifty is not a big deal as it is just 2-3 percent away from current levels. We need to understand larger trends. It looks we are entering into a very tricky phase in which there is uncertainty about upsides but there is strength in the short-term trends.

Next week may remain choppy and volatile owing to events like RBI monetary policy and exit polls. Obviously, December is going to be influenced by external factors like the outcome of the state election result.

Close

The big question is—will a positive result usher in a bigger up move? Well, the answer is a ‘No’ as the long-term trends are still down.

Besides, after December, mother of all elections i.e. general election is lined up in May. So, no investor will like to commit big money ahead of such uncertain event.

In the next three months, the market is likely to confine itself to the trading range with occasional bouts of volatility. Based on the weight of technical evidence with us, in the short-term, traders can remain positively biased as long as Nifty50 sustains above its 200-day moving average (10,744).

On the upside, if strength extends, let us say beyond 11,069 then we can look for a target placed around 11,400.  Below 10740, market shall eventually extend its corrective downswing to 10,489 and bigger sell-off shall be seen if 10,440 is breached.

Q. Do you think the pain in the mid-cap and small-caps are here to stay in 2019 as well?

A. For the first time, after the correction from January 2018 highs, small and mid-cap indices marginally outperformed Nifty with a gain of 11 and 12 percent respectively against the gain of around 10 percent in Nifty. It can be a good sign.

However, these two indices are still trading below or around 50-day moving average (DMA) and far below their 200-days moving averages which suggests that they are still in a strong downtrend.

But, if the market stabilises then they can do well going forward in 2019. By that logic, investors can selectively shop in this area without worry as worst may be over for them.

Q. What is your view on the currency which breached Rs 70/$ just last week?

A. November witnessed a strong appreciation of rupee with a gain of around 6 percent which has erased losses of preceding two months.

As of now, it appears the recent low of 74.48/$ is a durable bottom which may not get broken for a couple of months.

If this appreciation continues then rupee may test its breakdown point present around 69/$. Going forward weakness shall not emerge unless it closes below 70.57/$.

Q. How are crude prices looking on charts after 30 percent fall?

A. Surprisingly, crude prices have shown tremendous weakness in the last two months and in this process, they tested the demand line of a 30-month old ascending channel which is in progress from May 2016.

Hence, Rs 3,460 appears to be the last hope for crude bulls. As long as this commodity sustains above the said level, there can be some hope of stability going forward.

But, if prices decisively breach this level then this commodity may be heading for a much bigger cut with the initial target placed around Rs 3,300.

Q. What is your top three trading strategies for the coming week with an investment horizon of 1 month?

A. Here are three short-term trading ideas which could give 4-7 percent return in the next 1 month:

Bata India Ltd: Buy| LTP: Rs 1,039| Target: Rs 1,115| Stop loss: Rs 990| Return: 7 percent

This counter registered a strong breakout from its minor consolidation range and appears to be heading for new lifetime highs placed around Rs 1,115.

Hence, traders should adopt a two-pronged strategy on this counter and buy at current prices and prepare to add further on dips between Rs 1,025 – 1,010 for an initial target of Rs 1,115. A stop loss suggested for this trade is below Rs 990 on a closing basis.

Siemens: Buy| LTP: 949| Target: Rs 990| Stop Loss: Rs 897| Return: 4 percent

This counter appears to have registered a price and volume breakout on massive volumes and appears to have started a fresh leg of the up move from the lows of Rs 900.

Usually, after this kind of huge volume, day prices may undergo consolidation. Hence, traders are advised to buy at current prices and add further on dip around Rs 925 with a stop of Rs 897. The expected target for this trade is around Rs 990.

Britannia Industries Ltd: Buy| LTP: Rs 3,159| Target: Rs 3,300| Stop loss: Rs 3,037| Return: 4 percent

This counter registered a fresh breakout from its 8-day old minor consolidation range on relatively higher volumes. Hence, traders shall buy now and add further on declines around Rs 3,100 and look for an initial target of Rs 3,300. A stop loss suggested for the trade is Rs 3,037.

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

 



Assembly Elections 2018: Read the latest news, views and analysis here
Kshitij Anand is the Editor Markets at Moneycontrol.

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