We advise traders to refrain from building a new buying position until we witness a breakout above 15,370, Ashish Biswas, Head of Technical Research at CapitalVia Global Research Limited said in an interview with Moneycontrol’s Kshitij Anand.
Q) A week of consolidations where Nifty50 broke below crucial support levels. What led to the price action on D-Street?
A) After reaching record highs last week, the market remained mostly lacklustre and broke below the crucial support levels placed at 15,250.
The rally which we witnessed after the budget announcement was based on the fact that India's medium-term growth outlook seems conservative due to a higher fiscal deficit and slower consolidation path.
Along with this, the country continues to be second most affected globally by COVID-19, and the recent surge in the number of cases is increasing concerns among investors.
The banking and private sectors were the primary movers this week, with PSU banks rallying on privatization news.
However, starting the second half of the month, the global cues added to the uncertainties on reports of discouraging jobless data from the US and higher bond yields. Asian markets also reflected a negative bias.
Sustained FII buying has been the primary catalyst behind the past week's market uptrend. The market is expected to be rangebound in the coming few days till the COVID cases in India again see some decline, and macroeconomic data confirms the economic growth.
Q) The coming week will also be impacted by monthly expiry. What is your outlook on markets and important levels which one should track? What is the range you foresee for expiry?
A) The market failed to show resilience to stay above the level of 15250 on a sustained basis. While it is subject to further price action evolution, our research suggests that technical factors are shifted today to support a sideways correction in the future.
We advise traders to refrain from building a new buying position until we witness a breakout above 15,370. 14990-15250 is the range we foresee for the next week towards February 2021 expiry on Thursday.
Q) The broader markets outperformed benchmark indices in the week gone by. What led to the price action?
A) Post budget 2021, markets reacted positively by indices touching record highs. As broader markets indicate the economy's movement and investors' perception, we noted that broader markets sectoral stocks from pharma, infrastructure, housing, and banking stocks gained.
However, the markets lost the gains made due to global cues and the domestic slowdown of recovery; additionally, private banks were selling pressure post-privatization news.
An increase in the fiscal deficit, high inflation, and rising covid cases impacted the index performance. Mid-caps and small-cap companies performed irrespective of the weak index movements as the demand is increasing and assuring a strong growth.
Q) Do you think bulls are losing their grip on D-Street? Has the market texture turned towards sell on rallies from buy on dips?
A) We don’t expect bulls are losing their grip on D-Street, and the ongoing volatility is more like a healthy correction.
The market sentiment was overheated and reached a peak of optimism and an adjustment of it is part of the routine process of market dynamics.
We expect a sideways correction rather than a sharp correction this time. The investor should not expect a significant discount this time and buy on dips will be prudent.
Q) What is driving PSU banking stocks?
A) Finance Minister Nirmala Sitharaman, while presenting Budget 2021-22 earlier this month, had announced the privatization of Public Sector Banks (PSBs) as part of a disinvestment drive to garner INR 1.75 lakh crore.
To enable the same, the government has confirmed that the Bank of Maharashtra, Indian Overseas Bank, Bank of India, and Central Bank of India have been shortlisted for privatization.
Before the privatization, mounting bad loans and deteriorating financial conditions have made investors averse to investing in this space.
Investors see this as a positive development to see better productivity and reduce NPAs in the future under better management.
Q) Please suggest 3-5 trading ideas for the next 3-4 weeks?
A) Here is a list of trading ideas for the short term. Returns are calculated based on Friday’s closing:
Coforge: Buy | LTP: Rs 2566 | Target: Rs 2845 | Stop Loss: Rs 2480 | Upside 10%
The stock is trading above 200-Days EMA which indicates a positive outlook on the stock. Coforge is trending in an upward trending channel and has reversed from the support line of the channel.
We recommend a buy above Rs 2660. We can expect a target of Rs 2845 from a medium-term perspective with a Stop Loss below Rs 2480.
Maruti Suzuki: Buy | LTP: Rs 7328 | Target: Rs 7940-8070 | Stop Loss: Rs 7169 | Upside 10%
The stock is trading above the 200-Days EMA which indicates a positive outlook on the stock. Maruti is also trading in an upward trending channel and has even reversed from 8 & 50-Days EMA support.
We recommend a buy above Rs 7500. We can expect a target of Rs 7940-8070 from a medium-term perspective, and a stop loss can be placed below Rs 7,169.70.
ONGC: Buy | LTP: Rs 105 | Buy above Rs 112 | Target: Rs 135 | Stop Loss: Rs 97| Upside 20%
ONGC prices reversed from the support of 8 & 40-Days EMA. A recent cross-over of 8 & 50-Days EMA has been witnessed which indicates strength in the stock price.
We recommend a buy above Rs 112, maintaining the target of Rs 135 from a medium-term perspective, and a stop Loss can be placed below Rs 97.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.