CHANDAN TAPARIA
ANALYST-DERIVATIVES, MOTILAL OSWAL FINANCIAL SERVICES
Where is the Nifty headed?
The index made a bearish candle on weekly and daily scales, along with the formation of lower highs – and lower lows on daily chart for the last four sessions. The major trend is still intact, but till it is below 19,800 zones, some more profit booking could be seen towards 19,600, then 19,350 zones, whereas hurdles are placed at 19,881 and 20,000. Nifty now has major support at the Gann square root of 19,600; the next meaningful level could open towards 19,320 zones below that. Bank Nifty has formed a big bearish candle on the weekly scale and made lower highs – and lower lows on the daily scale for the last four sessions. Till it holds below 45,000, some more profit booking could be seen towards the next key support at 44,250-44,000 while hurdles are shifting lower at 45,000 and 45,250.
What should investors do?
Bullish setups are seen in IT, auto and PSU banks and weak setups in most other sectorial indices. Stock-wise, positive setup was seen in Maruti, Canara Bank, Berger Paints, REC, PFC, TCS and Asian Paints, while weakness in pharma, cement and most of mid-and small-cap stocks looking at the lower advance-decline ratio of the broader market.
RAHUL SHARMA
DIRECTOR, HEAD- TECHNICAL & DERIVATIVE, JM FINANCIAL SERVICES
Where is the Nifty headed?
Nifty’s 20-day exponential moving average (DEMA) has been breached for the first time this month, while mid- and small-cap indices have successfully maintained their 20-day DEMAs. Interestingly, no significant increase was observed in India VIX (Volatility Index) despite the turbulence. Options data of Nifty suggest a bearish outlook, while the Bank Nifty options chain suggests writing activity at a 44,800 strike. Interestingly, FII long aggression has come down significantly in index futures; while retail, which was short, has turned net long – not a positive development.
What should investors do?
19,600 is a make-or-break level for the uptrend, and any closing below this could mean more downside. If Nifty sustains this level on a closing basis, expect a smart recovery in the subsequent few sessions. Nifty Bank is a significant pain point due to private banks. Given its relative positioning, auto stocks look like a good place for longs. Our top picks are Escorts and Maruti. On the bearish side, one can look for shorting opportunities in UPL and Dr Reddy’s.
NAGARAJ SHETTI
SENIOR TECHNICAL RESEARCH ANALYST, HDFC SECURITIES
Where is the Nifty heading?
The downside momentum continued in the market for the fourth consecutive session on Friday, and Nifty witnessed high volatility. A reasonable negative candle was formed on the daily chart with an upper shadow. Technically, this indicates a sell-on-rise opportunity. The previous two opening down gaps remain unfilled, and they could be considered as bearish breakaway and bearish runaway gaps. Nifty on the weekly chart formed a long bear candle last week, indicating a sharp downside reversal. However, forming a long negative candle after a reasonable up-move signals an important top reversal pattern. The short-term trend of the Nifty continues to be weak. Having placed near the lower supports, a minor upside bounce from 19,550 levels is possible this week. The expected upside bounce could be shortlived, and the market could eventually slide down to 19,200-19,100 levels.
What should an investor do?
One may continue with short positions in Nifty and look to add more on any upside bounce to 19,800- 19,900. Stoploss for shorts to be placed at 19,900 and look to book profit around 19,200. Banking, financial, healthcare, oil & gas, energy and realty sectors could decline further. FMCG, IT, PSU banking and media are expected to show resilience in a weak market. Stocks with negative bias include ICICI Bank, Cipla, Zydus Life, Reliance, Lodha, SBI Life, Muthoot Finance and DLF.