Both MACD and the RSI has been showing divergence indicating a severe fatigue at higher levels. Chances are that this would lead to a deeper correction all the way back to the 10,200-9,950 mark with the intermediate supports placed at 10,500, Pushkaraj Sham Kanitkar, AVP - Technical Research at GEPL Capital, said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q: The Nifty50 slipped nearly 2 percent for the week ended May 18. It broke below crucial support levels on charts. Do you think we are headed lower in May series?
A: Yes, certainly. The Nifty50 is largely holding fort given the strength in some of the heavyweights like HUL, ITC, HDFC Bank, HDFC Ltd etc.
The broader markets, as well as the low weights in Nifty50, are already in the docks. We feel that the same sentiment will translate onto the heavyweights within the index and that would bring down the Nifty50 as well in coming weeks.
Q: MACD gave a sell signal on the daily charts on Thursday for the first time since March. What are its implications?
A: Not just the MACD, the RSI too, has been showing divergence indicating a severe fatigue at higher levels. Chances are that this would lead to a deeper correction all the way back to the 10,200-9,950 mark with the intermediate supports placed at 10,500.
Q: Plenty of stocks hit fresh 52-week lows this week instead of 52-week high. Do you think these are stocks which are carrying the momentum and investors should ideally book profits or stay away from them?
A: We would still advise to HOLD onto the winners (read 52-week highs) and the flip side it’s a strict no for the losers as well.
Q: What is your call on smallcap and midcap stocks? Should investors stay away or just book profits on rallies?
A: The midcaps have remained underperformers on both sides of the current move. They corrected to a greater extent between Jan-Mar 2018 and moved higher with less force in the current up move.
Midcaps have cracked more than 6 percent in the last 3 weeks, compared to an up move of around 0.5 percent in the benchmark Nifty. The underperformance of MIDCAPS is here to stay and hence a strict no for midcaps for now.
Q: What is your call on crude for the coming week?
A: It would tend to remain bullish till the point the Brent doesn’t fall below the USD 72 mark, which just touched the USD80 mark in Thursday’s trading session.
The spread between Brent & Sweet Crude Oil is currently placed at USD 8, which is on the higher side of the band which indicates that the rally in Crude Oil is here to sustain for the time being.
Q: Top 3-5 positional calls which could give handsome returns to investors in next 1 month?
A: Here is a list of top three stocks for the coming week:
TCS: Buy| Target: Rs 3,900| Stop loss: Rs 3250| Return potential 11%
TCS witnessed a breakout in the calendar year 2018 but started consolidating between 2,750-3,250 levels in the month of May.
There is the absorption of heavy volumes during this period (including the stake sale by the promoters). TCS formed and witnessed a breakout from the Cup & Handle pattern above Rs 3,300.
A breakout from the pattern projects a pattern completion targets around Rs 3,850-3,900 with just one condition that it should trade above Rs 3,250.
Kotak Mahindra Bank: Buy| Target: Rs 1360| Return potential 5%
A breakout from a 6-month consolidation occurred in the second week of April as prices climbed above the all-time high placed at Rs 1,110. A breakout from the consolidation spaced between levels of Rs 950-1,110 projects to extrapolated targets around the Rs 1,360 mark.
The consolidation was accompanied by a good rise in “delivered quantity”, which is an indication of genuine long-term buying in the scrip.
IndusInd Bank: Buy| Target: Rs 2,100| Return potential 8%
The stock is in a rational uptrend that started with a move above the 200-DMA placed at Rs 1,750. This move gathered further strength when the stock moved above the parallel channel placed at Rs 1,800 levels. This up move projects targets placed around Rs 2,100 levels.
Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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