"We expect the Nifty50 to settle near 14,500-mark with strong support emerging near 14,200 levels. The index could climb towards the resistance mark near 14,700-14,750 on the upside, said Navneet Daga, Senior Derivatives Analyst – Institutional Equities, YES SECURITIES in an interview with Moneycontrol’s Kshitij Anand.
Q) A historic week for Indian markets when markets scaled 50,000 but profit booking at higher levels pushed the market in red/flat towards the close of the week. What led to the price action – is it profit taking or something is worrying investors?
Indian markets had a dream run in the past 2 months but the near-term catalysts have changed with global markets getting jittery, as well as the upcoming Budget 2021.
We expect near-term consolidation with negative bias with Nifty finding strong support zone near 14,200 mark. A healthy correction with lighter leverage would be a good setup going into the Budget event.
Q) Which are the important levels to track in the January F&O expiry week, and ahead of the Budget?
We expect the Nifty50 to settle near 14,500-mark with strong support emerging near 14,200 levels. The index could climb towards the resistance mark near 14,700-14,750 on the upside.
Interestingly, India VIX remained still near lower band even in correction days that indicates traders' expectation of a mild correction, and wild intraday gyration to continue.
A close below 14,200 on the Nifty50 is likely to fuel the expectation of a larger correction setting in for markets.
Q) Tata Motors has rallied over 60 percent in January. What is fuelling the rally in the stocks? Are investors considering Tata Motors to be India’s Tesla?
Tata Motors rallied almost 80 percent in the current month that indicates a larger turnaround story markets are pricing.
The stock is still trading at half the price from its peak levels, so investors having a long-term perspective should still hang on, while traders should look to book profits as sharp swings are expected in near term.
Q) Small & midcaps witnessed some profit-taking. Do you think bulls would be able to take control in the run-up to Budget?
A) It is difficult to comment on what is in store on the Budget event, but given a larger setup, we don’t expect big correction in small and midcaps as investors/traders chasing the momentum with vigour, chances of mid and small-cap stocks to expand the rally is higher post this correction.
Q) What should be the investment/trading strategy of investors ahead of the big event?
Trading strategy of investors would now focus on value stocks as typical growth stocks have already had their fair share of run-up.
We expect a rotation of money from high flyers sectors to domestic-oriented companies. Auto stocks remained still among best picks, while we remained cautious on Metals and Banking stocks after this steep run-up.
From an options trading perspective, traders should use a bear put protection strategy for portfolio heading, while aggressive traders should be using condor/butterfly spread to trade budget event.
Q) Top 3-5 trading ideas for the next 3-4 weeks?
Axis Bank (Sell):
The stock is finding supply at higher levels near Rs 680 - Rs 690 zone, given strong underperformance seen in the banking stocks in the near term.
We expect the stock to move towards Rs 620- Rs 625 zone in this correction. We have a negative view of the stock, but that could reverse on closing above Rs 690-mark.
The stock saw a sharp short-covering rally in the past few sessions; however, we expect the near-term correction should be used to accumulate the stocks in the range near Rs 2,000 - Rs 2,025 mark.
For the near-term targets of Rs 2,150/Rs 2,170 levels, a stop should be placed near Rs 1,970-mark.
Traders should look to create long positions on the index in the range of 14,300 with strict stop loss levels of 14,200 on a closing basis. We believe post this correction, a sharp rebound is in the offing ahead of budget event.Disclaimer
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