IT sector to rally in wake of June low, dollar to consolidate: Cashthechaos's Jai Bala

The Indian IT sector may see a reversal in fortunes as the sector is expected to rally from after hitting a recent low in June, said Jai Bala, chief market technician for Cashthechaos.com. 

“There is some potential for the IT sector to rally somewhere close to 30,000 provided the June low holds and in my opinion it will hold,” Bala added in the interview to CNBC TV18 on July 5. 

Major Indian IT stocks, which shed value in the last month, are expected to see gains with TCS and Infosys hitting 3,600 and 1,600 levels respectively, he said.

Bala, however, added that the manner in which the companies hit these targets will help ascertain the short-term future of the stocks.

“I will be a little bit uncomfortable if the Nifty IT index goes below 27,100 levels, but in fact that would increase the odds that the June low will hold and we will go up towards 30,000 as a countertrend bounce,” he said.

Speaking about the currency markets, Bala said that the current upswing in the dollar index should consolidate anywhere between 99 and 106.5 whereas the euro should find resistance at 1.02 levels after hitting a low in June.

“From a medium term perspective I am expecting the dollar to go somewhere near 115 but now I think the dollar index, which comprises 58 percent of the euro, will see a consolidation and is very close to a short term peak,” he added. 

In the last few weeks, the rupee has been depreciating against an appreciating dollar, with the home currency hitting an all time low of 79.375 per dollar on Monday.