World shares held near three-week lows on Friday, and crude oil languished near this year’s lows, as caution prevailed ahead of the crucial U.S. jobs data that could decide the size and speed of coming rate cuts in the world’s largest economy.
Analyst Sahaj Agrawal, Senior Vice President: Head of Derivatives Research at Kotak Securities interacted with ET Markets regarding the outlook on Nifty and Bank Nifty the ongoing series. Following are the edited excerpts from his chat:
Nifty still seems well placed facing some resistance at its all time high. Do you suggest any caution here or the “buying the dips” stance will be beneficial?
I am of the opinion that markets are in a consolidative/corrective phase. Expect lack of upside momentum till a new positive setup does not mature. Having said this, specific sectors and stocks are available at attractive valuations with definable risk reward propositions – would use the buy on dips strategy in this value space and not in the momentum basket.
September, as it is said, has not been a good month for markets globally. Do you foresee any events that may make this true for our market again? Or do you think our market may be ready to break this record just like its previous record of closing on new highs for 13 consecutive days?
As we speak we do not see a strong momentum trigger in the markets based on data. This is somewhat in line with the nervousness on account of the upcoming FED event and the overall setup of the market being consolidative/corrective since mid-august. On the technical front we believe 25350 is a critical trend resistance level and until the same is conquered a new setup does not mature.Bank Nifty was gaining some momentum, even trying to break above the 50 DEMA. However, it broke below its short-term EMAs also yesterday. What is your outlook on the index now?
Banknifty has underperformed the broader indices since early august. Having broken short term averages currently support is placed at 100DEMA seem around the 50200 mark. In context of the broader market setup expect volatility to remain high for the high beta sector and whip-saws around critical support zones cannot be ruled out.
Any strategy for Bank Nifty?
At this point of time, far OTM call option selling would be advisable for traders with proper understanding of derivatives. This strategy is expected to work well until a momentum based trigger does not happen in the options data setup. A setup maturity would indicate the possibility of momentum up-move in the near term.
Can you help the traders in understanding how to read the FII-DII data to their advantage?
The fabric of the markets have changed over the recent years. Domestic dominance has increased significantly over time. Having said this, I have always been of the opinion that any single data parameter should not be over relied upon – they act as pillars in the overall scheme of things and are suggestive in nature. Over the past few weeks, the DII segment has been consistently short in the markets while the FII segment has been flip-flopping.
Sectorally, Nifty Pharma, FMCG and consumer durables are at their ATHs. Do you think these are the themes to play?
Defensives usually do well in volatile times. I think for the medium term these sectors look attractive and should be added into meaningful dips.
Talking about indices again, the midcap 100 index is also up, barring yesterday’s session where the entire market witnessed a sell-off. Do you see any safe bets in that space for the traders?
At this point of time, we would like to maintain a stock specific approach. There are opportunities in the midcap space that look attractive- select midcap banks look attractive at current levels considering a blended approach of trend and value.
For 2 consecutive days, the index was dragged down by the heavyweight reliance. Despite its bonus issue announcement, the stock fell by 1.4%. What is your technical view on the counter given that the stock is still in an uptrend on the monthly chart? Is it likely to test its 10 period EMA and then will be ready for a bounce back?
Reliance trades with a positive bias with support placed around the 2700 mark. Any correction closer to the trend support level would suggest taking a risk defined trade considering favourable risk-reward.
Any sectors to watch out for?
At current level, Metal and Banking stocks look attractive from multiple parameters. Select stocks from these sectors offer good value with a positive technical setup.
Stocks within those sectors?
We like Jindal steel and power from the metal space. From the Banking space – Axis bank, DCB Bank and IDFC First bank are the stocks on our radar for now. All of these mentioned stocks provide favourable risk-reward propositions based on value and trend analysis.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)