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Last Updated : Jul 23, 2019 10:42 AM IST | Source: Moneycontrol.com

Sell-off in US stocks biggest risk to Indian markets: Sharekhan

The ideal strategy will be to sell on rise. Various technical parameters are suggesting that the bears have an upper hand in the market

 
 
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The most important factor, in my opinion, is the risk of US equity market sell-off. While the Indian benchmark indices are off their all-time highs, the US indices are still hovering around the respective highs, Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts:

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Q: What are the factors that are weighing on Indian markets?

A: Various factors are weighing on the Indian market for quite some time now. Some of the factors are domestic and some are global. Well, at this point, the most important factor, in my opinion, is the risk of US equity market sell-off. While the Indian benchmark indices are off their all-time highs, the US indices are still hovering around the respective highs.

The structure, however, is showing signs of weakness, which may result in an actual sell-off over the next few weeks. This can accelerate the fall in Indian equities.

Q: What are the important levels to watch out for in this week considering we have F&O expiry as well?

A: Nifty, in the week gone by, has broken down from a bearish Flag pattern. On the way down, it has broken the swing low of 11,461.


So, the outlook for the next week continues to be bearish. The next important level on the downside will be 11,330, which is near the 40-week exponential moving average (EMA) with the potential to drag towards the weekly lower Bollinger Band i.e. near 11,200.


Q: Do you see the underperformance in the broader market to continue as earnings have failed to lift sentiment?


A: The broader market indices did not participate in the recent short term pullback. The mid and smallcap indices breached their respective July lows ahead of Nifty. 

Nevertheless, the sell-off is now becoming an across the board phenomena. So the trajectory for the market, in general, will be downwards with mid and smallcaps leading the way.

Q: What should be the ideal strategy of traders for this week—wait and watch or buy the dip?

A: On the contrary, the ideal strategy will be to sell-on-rise. Various technical parameters are suggesting that the bears have an upper hand in the market.

Any minor degree bounce in the market can be considered as an opportunity to initiate a fresh short position. As far as Nifty is concerned, a minor bounce towards 11,480-11,500 can not be ruled out.

Traders can initiate fresh sell position over there with reversal above 11,620. Targets on the downside will be 11,330 and 11,200.

Q: What are the important factors that investors should watch out for before buying stocks that have plunged recently?

A: Buying such stocks can very well turn out to be a misadventure in the current market scenario. With the current fall, the Nifty is approaching the May low of 11,108, which is a make or break level for the medium term. 

If the bears indeed manage to break the level then the Nifty will be in for a significant fall.

Q: Are there any stocks that could be an attractive investment bet for 1 year or more?

A: We recommend these two stocks for long term horizon:

MCX India

MCX seems to have bottomed at the February low of Rs 643.50. It formed a multi-month Ending Diagonal pattern which got over at the low. 

The stock started rallying from that point and has now broken out from the pattern on the upside.

A short term dip towards Rs 810-800 can be considered as a buying opportunity with reversal below Rs 768. On the higher side, levels of Rs 940 and Rs 1,030 will be the medium-term and long-term targets, respectively.

Tata Power

The stock is in process of forming an accumulation triangle, which is spanning over several months. The pattern is being formed near a long term trendline support. 

Thus one can accumulate the stock near Rs 62-60 with reversal below Rs 55. Targets on the higher side will be Rs 85 and Rs 90.

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. 



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First Published on Jul 23, 2019 10:42 am
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