It is too late to exit stocks from the existing portfolio that are hitting 52-week lows, and if someone is looking to buy then this is an opportunity to pick some good names like L&T, Axis Bank, SBI, JSW or Tata Steel, Mehul Kothari, Sr Technical Analyst at IndiaNivesh Securities Limited, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q: How is the market likely to react to measures announced by the Finance Minister on August 23?
A: Nifty recovered more than 200 points from the day’s low on August 23, on the hopes that government might rollback FPI surcharge. We are likely to see a gap-up opening of around 100-150 points on August 26.
In such a scenario, 11,000 would remain an immediate hurdle for the markets.
Q: Another muted week for Indian markets weighed down by both global and domestic cues. What is your outlook on markets for the coming week?
A: Nifty not only breached the previous year’s close of 10,862 but also sneaked below the recent swing low of 10,780. We had a positional target of 10,600 on the Nifty, and in the recent session, we already saw 10,637.
Going ahead, we expect the things to settle down due to various technical factors. First and foremost, we are now in the demand zone of 10,900–10,500, where the index consolidated from Dec 2018 to Feb 2019 before shooting up to an all-time high.
We expect this to happen again. In addition, the number of oversold Nifty stocks has reached 14. Historically, we have seen that in such a situation, there is a sharp pullback in the markets.
Further, in derivatives, the long-to-short ratio of FIIs in index futures has dipped below 30. Since Feb 2018, we observed that such large short positions in index futures are followed by short covering in the index.
Thus, all the above factors indicate that there could be a bounce in the index in the coming weeks in the range of 11,000–11,180. This view will be negated once the Nifty breaks 10,500 decisively.
Q: More than 500 stocks hit a fresh 52-week low on the BSE on August 23, mostly from the small and mid-cap space. What should investors do if they hold any of them in their portfolio?
A: It’s too late to exit the stocks from the existing portfolio if they are of good quality. In fact, for fresh buyers, this is an opportunity to buy some good names like L&T, Axis Bank, SBI, JSW or Tata Steel.
Q: What is your call on the rupee which has already hit 8-month low?
A: For the near term, technically, we expect 72.50 to act as strong resistance for the USD-INR pair which has already reached 72.00 mark.
Before clearing 72.50 on the upside, we expect the pair to retest 71-70.50 levels in the coming weeks. Thus, there could be some recovery in the rupee.
Q: Any big triggers that investors have to watch for the coming week?
A: Yes, the outcome of the Jackson Hole meeting is of much importance for medium-to-long-term investors since it will lay out the trajectory for interest rates in the US.
However, for short-term traders, we have the F&O expiry on the domestic front, which is nowadays not a big event (after the introduction of weekly options). We expect the series to end on a higher-end, at least from the current levels.
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