"I strongly expect the Nifty IT index to stage a breakout this year; this breakout will happen if the index moves past 31,700-32,000 levels with a strong thrust," Milan Vaishnav, CMT, MSTA, founder of Gemstone Equity Research & Advisory Services, says in an interview to Moneycontrol. The breakout would be major and sustainable, he feels.
Looking at the weekly charts, he says it is fairly evident that the zone of 19,900-20,000 will be difficult to cross in the near term for the Nifty50. There is a clear deceleration of momentum which is evident from the narrowing Histogram, he adds.
With nearly two decades of experience in the capital markets, Milan advised that fresh entries in Nykaa must be avoided at this time, and Jindal Worldwide has to be approached only with a medium to long-term perspective.
Q: What could be the most possible trend for the market - breaking of 19,000 mark or hitting of 20,000 mark in current quarter?
There are two angles to look at when it comes to gauging Nifty's trend. Talking from a very short-term perspective, some minor technical pullbacks cannot be ruled out. Nifty has tested the 50-day MA (moving average) which presently stands at 19,258 and Nifty may try to defend this level at close as it did on Monday (August 14).
However, taking a medium-term view by looking at higher time-frame charts, it is pretty evident that Nifty has put a temporary top in place at 19,990.
Looking at the weekly charts, it is fairly evident that the zone of 19,900-20,000 will be difficult to cross in the near term. The Nifty has also ended up violating the important pattern support zone of 19,500-19,600 levels. There is a clear deceleration of momentum which is evident from the narrowing Histogram; this may also lead to a potential negative crossover on the MACD (moving average convergence divergence) indicator.
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So, there are higher chances that the Nifty may show short-lived strength by showing technical pullbacks, but eventually go on to test lower levels and find support near 19,000.
Q: Bank Nifty looks worried after recent RBI action. Do you think the current selling pressure is warranted and will the index break 43,000 mark in coming weeks?
Bank Nifty is relatively weak not only against Nifty but against the broader Nifty500 Index as well. Presently it stays inside the lagging quadrant of the Relative Rotation Graph and it is not showing any signs of improvement in its Relative Momentum against the broader markets.
Importantly, pattern analysis of Bank Nifty on the daily chart shows a breakdown from a bearish Head & Shoulder pattern. This is a valid H&S pattern as it has emerged after a significant up-move and has a potent history of recording trend reversals. A classical price target measurement shows that if Bank Nifty tests 42,700-43,000 on the lower side, then this move should not surprise us.
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The index has a strong resistance in 44,200-44,350 zone; the present breakdown from the bearish Head & Shoulder pattern will get nullified and negated if Bank Nifty manages to cross 44,700 levels. Until then, this breakdown will stay valid and very much in force.
Q: Do you think the Nifty IT will make a successful attempt this time to break 31,600-31,700 levels and hold the same going forward?
Yes, I definitely think so. I very strongly expect the Nifty IT index to stage a breakout; this breakout will happen if the index moves past 31,700-32,000 levels with a strong thrust.
Presently, it is placed inside the lagging quadrant of the RRG but it is seen strongly improving on its Relative Momentum against the broader markets. To put it in simple terms, the index is consolidating just below its breakout zone; from a technical perspective, it is absolutely well-placed to stage a major and sustainable breakout this year.
Q: Are you buyer in the Nykaa which plunged 8 percent on Monday?
No, not at all. I will not be a buyer in Nykaa despite the fall of 8 percent seen on Monday. In fact, this fall has displayed the inability of the stock to move past the confluence of the resistance zone created by the convergence of 50-, and 200-DMA which are presently placed at Rs 144 and Rs 146 respectively.
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Fresh entries in Nykaa must be avoided at this time; one can consider entering Nykaa only if the stock is able to cross above Rs 146-148 levels and sustain above that zone.
Q: Do you still expect value in Jindal Worldwide that has been on buyers' radar in August?
Jindal Worldwide has to be approached only with a medium to long-term perspective. The analysis of the weekly chart shows that following a top formed at Rs 476 in January this year, the stock retraced, formed a double bottom in the Rs 295-310 zone, and rebounded from there. This also saw the stock taking support at the 50-Week MA twice during this time; the 50-week MA is placed at Rs 667.
So far as finding a value in this stock, some amount of consolidation cannot be ruled out; however, once an certainly accumulate this stock and expect it to test Rs 470-480 levels over the medium term. Any close below Rs 330 would negate this technical setup.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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