Here are the edited excerpts from the interview:
Q. The Nifty50 rose by about 6 percent for the week that ended on June 5. But, consistent selling pressure below 10,200 will cap the upside. How would you sum up last week's action?
A. The Nifty50 started the week with an upward gap and a buying momentum for most parts of the week led it to a close in positive territory. The Nifty50 closed at 10,142 with a gain of 562 points on a weekly basis.
The index continued its positive momentum for the second consecutive week. Global markets also remained strong. The gradual reopening of economies worldwide after easing lockdown measures continued to boost investors' confidence.
On the weekly chart, the index has formed a long bullish candle forming a higher high-low compared to the previous week and has also closed above previous week's high — indicating strength ahead.
The index continued to move in a ‘Higher Top’ and ‘Higher Bottom’ formation on the daily chart which indicates a sustained uptrend.
Q. What are the important levels to watch in the coming week? Do you think a breakout above 10,200 is possible?
A. The Nifty50 is set to give a breakout above 10,200 in the coming week. The market has witnessed a broad-based buying action seen across all the sectors.
The market witnessed high delivery volumes and the turnover resulted in a positive market breadth which indicates participants are confident towards bullish move in the coming week.
During the last week, the Nifty managed to hold 10,000 levels on a closing basis. The index has witnessed aggressive PE writing on 9,900, 10000 strikes price which indicates base is shifting higher while CE writers unwinding their positions and shifted to a higher strike price 10,400-10,500.
The chart pattern suggests that if Nifty crosses and sustains above 10,200 levels, it would witness buying which would lead the index towards 10,400-10,500 levels.
However, if the index breaks below 10,000 levels, it would witness profit booking which would take the index towards 9,800-9,600 levels.
Q. Any important factors that investors should watch out for in the coming week, that are likely to chart market direction?
A. All global markets have shown recovery of around 30-40 percent, after a sharp fall seen in the month of March. Major central banks and the governments have taken the steps to revive the economy and has announced big stimulus packages to support the economic activity.
The Indian market has shown the flow of liquidity from FII and DII front, FIIs turned net buyer in the last few days. Reliance Industries (RIL)'s right issue showed an overwhelming response by the investor and garnered approximately Rs 80,000 crore which shows confidence is coming back to the street.
The government has announced certain measures for easing the nationwide lockdown from June 8, and if there is no incremental negative news from now on, then the market will see some stability.
If Nifty continues to trade above 10,100 we will see another rally in the coming week towards 10,400-10,600.
Q. What is your call on the NiftyBank? What we are seeing is hot and cold moment for rate sensitive stocks? What is causing volatility in the banking and NBFC space?
A. Bank Nifty started the week with an upward gap and a buying momentum for the most part of the week. Bank Nifty closed at 21,035 with a gain of 1,737 points on a weekly basis.
On the weekly chart, the index has formed a long bullish candle. It formed a higher high, and higher low compared to the previous week and has closed above the previous week's high which indicates a positive bias.
On the daily chart, “W-Pattern” is in the making and a close above the 21,550 will confirm the same. The index continued to move in a Higher Top and Higher Bottom formation on the daily chart which indicates a positive bias.
The chart pattern suggests that if Bank Nifty crosses and sustains above 21,400 levels, it would witness buying which would lead the index towards 22,000-22,500 levels.
However, if the index breaks below 20,300 levels, it would witness selling which would take the index towards 20,000-19,500. The Bank Nifty is now well placed above its 20 SMA indicating a positive bias in the short term.
Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Bank Nifty to trade in the range of 22,500-19,500 with a positive bias.
The extension of moratorium by the Reserve Bank of India (RBI) poses challenges across the sector. Nonetheless, there is a case to gradually increase portfolio weight in the forthcoming months accumulating high-quality private banks.
The BFSI sector now actually offers good contra plays across the sector as there are high-quality companies with solid liquidity ratios available at cheap valuations.
Q. There was plenty of action in the small & midcap space — what is driving the optimism in the broader markets?
A. Our domestic markets are largely mirroring global counterparts. Midcap and smallcap stocks generally performance in healthy market conditions and since the last few weeks, we are in a positive trend, and the market has witnessed broad-based buying action in quality midcap and small caps.
We expect the smallcap and midcap stocks to perform batter and we could well see another 3-5 percent upside in the Midcap and smallcap space.
Investors can add quality midcaps and small-cap can in their portfolio for decent returns in the near/short term. However, any negative development on the global front might derail the momentum.
Q. Which sectors are looking strong and which are looking weak based on technicals?
A. Technically, Pharma, Telecom, IT and Banking sectors are looking strong.
Q. Three trading ideas for the coming week with a time horizon of three-four weeks?
A. Here is a list of top three trading ideas which could give 10-19 percent returns in the next three-four weeks:
The stock is moving in an “Up Sloping Channel” on the daily chart indicating a sustained uptrend. The daily strength indicator RSI continues to trend higher indicating that the bullish momentum is still intact.The stock has recaptured the 20-day and 50-day MA and has closed above the same indicating short-term trend reversal at lower levels.
Good volume activity is observed this week which indicates a strong interest from the bulls.
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