CLSA's Laurence Balanco says Nifty uptrend still intact, largecaps making a comeback

Gold, S&P equal weight index, Asia-Pacific banking index has broken out on the upside, noted Laurence Balanco

CLSA's technical analyst Laurence Balanco believes the chart of Nifty 50 is showing that the market uptrend is intact, even though there may be some sectoral rotation of money at play.

"We are not seeing major signs of weakness (on Nifty 50) and in the month of July, largecaps are making a comeback compared to the midcaps", Balanco said in a conversation with CNBC-TV18, adding that the index has not made fresh lows compared to June, though there has been some hesitation in the midcap rally. Balanco maintains a longer term price target of 37,700 on Nifty 50, with a level of around 21,700 appearing as a strong floor for the index.

The past few weeks have seen all asset classes move higher in tandem, including equities, gold and bitcoin with gold seeing a breakout recently that has prompted CLSA to raise its price target to $2625/oz. "Gold, S&P equal weight index, and Asia-Pacific banking index has broken out on the upside', Balanco added.

CLSA noted that HDFC Bank has seen a pullback in July which Balanco said seems disappointing, but the stock is still above itds 50-DMA and 200-DMA, and one needs to watch out here. IT services in India have seen money rotation however there has not been any leadership in the IT space, Balanco added. Within telecom, RIL remains a preferred pick for CLSA with a Rs 3500-3600 price target.

On Brent Crude, CLSA's chartist said there are no signs of any directional breakout from the range and the current band may hold till the year end. Oil prices have stayed higher so far in 2024, supported by supply cuts from OPEC+ offsetting higher production from non-OPEC nations. Signs of poor demand from China, which is a major importer, have pulled back prices from higher levels seen earlier in July.

Cryptocurrencies have been on an uptrend and it is expected that the move may continue here, with prices of Bitcoin testing levels above $65,000 this week. The emergence of Republican nominee Donald Trump is the race for the White House too has added to the sentiment, as Trump has held pro-crypto views in the past. In a recent post, billionaire investor Mark Cuban posted on X that Trump as president "makes it easier to operate a crypto business because of the inevitable, and required, changes at the SEC (US Securities and Exchange Commission)."

"It's a bitcoin play," Cuban wrote.

The Japanese yen has risen by about 4% since last week, after Japan is believed to have initiated a surprise bout of currency buying on July 11. A prominent Japanese minister has called for BoJ to raise interest rates which may prop up the value of Yen. As a result, USD-JPY trade saw a break below the 50-DMA for the first time in 2024, and Balanco says we can expect further volatility here.

In his interview with Bloomberg Businessweek, Donald Trump has pointed out the weakness of Yen and Yuan, prompting a view that he may back the move to weaken US Dollar if he wins election in November.