As the Nifty50 heads into the critical resistance zone of 11,450 – 11,500 levels, we advocate positional traders with short to medium-term outlook to take some money off the table.
Once Nifty registers a decisive breakout above its critical resistance then new targets shall open up which shall initially take indices towards 12,200 levels, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said in an interview with Moneycontrol’s Kshitij Anand.
Q: Indian markets scaled fresh record highs this week but we lost momentum in the second half. Do you see profit booking at higher levels and investors should bring down their long positions?
A: When the long-term trend is very strong one should not worry about short-term correction which is part and parcel of the uptrend as these dips will eventually get bought into and the indices will scale fresh new highs.
Having said that, at this juncture indices are approaching major resistance point which is known to create sharp dips and lead to time-wise consolidation. Traders with a short-term view will be better off by taking some money off the table.
Hence, as Nifty50 heads into the critical resistance zone of 11,450 – 11,500 levels we advocate positional traders with short to medium-term outlook to take some money off the table.
However, based on our analysis of long-term trends we believe that once Nifty50 registers a decisive breakout above its critical resistance then new targets shall open up which shall initially take the indices towards 12200 kinds of levels.
So, in the zone of 11,450 – 11,500 some sort of consolidation can’t be ruled out. On the downsides, the zone of 11,210 – 11,185 shall continue to remain as critical support.
Q: Small and midcap stocks have picked up momentum which was not visible in earlier rallies. Do you think that recovery has begun in this space?
A: The Nifty midcap-100 and the small-cap 100 indices just started a mild recovery after hitting a new swing low three weeks back i.e. in the month of July and are hardly up by 8-9% from their respective lows.
However, momentum in the broader markets shall further pick up once Nifty500 index, which is just 2 percent away from its lifetime highs registers a sustainable breakout above its all-time highs of 9,895 levels.
When this broader gauge hits new highs then momentum in the broader markets shall get cemented further.
In such a scenario, scrips from the mid and small cap segment also try to piggyback on this broader momentum and we can expect them to test their interim tops registered in last May which are roughly 10 percent away from current levels.
Q: Which sectors are looking to lead the rally and which could be laggards?
A: Market participants are still interested in buying the same names making things look more expensive which are being already considered by generalist as expensive.
Therefore, leadership may continue to remain with Financials, IT and FMCG. But, now new pockets of opportunities are appearing which may deliver decent returns from current levels. Hence, investors can shift their focus selectively towards Pharma, metals and some of the prominent names from PSU Banking space.
Q: What is the outlook on the rupee? Do you think the worst is over?
A: Essentially for the last four weeks, the rupee is moving in a range of 69 – 68.25. Unless it settles below 68 for a couple of days we can’t conclude that the worst is over.
As long as it trades inside this range the threat of more weakness going forward will remain open as a breakdown of 69 will open up a range target placed around 71.
Hence, unless a breakout below 68 occurs for the rupee the currency will not strengthen. On such a breakout we can expect an initial target of 67.
Q: Top three stocks which investors can look at with a holding period of 1 month?
A: Here is a list of top three stocks which could give 4-8% return in the next 1-2 months:
Bata India: Buy | LTP: Rs 938 | Target: Rs 1,020 | Stop Loss: Rs 900 | Return 8.7%
After hitting lifetime highs this counter appears to be on the verge of a fresh breakout above its two-month-old ascending channel. Such a breakout will throw up a new target placed around Rs 1,020 levels.
Hence, positional traders should buy now and can add further on declines around 920 and look for a target of Rs 1,020. A stop loss could be placed near Rs 900.
Havells India Ltd: Buy | LTP: Rs 641 | Target: Rs 697 | Stop Loss: Rs 620 | Target: Rs 8.7%
This counter registered a breakout above its three-month-old ascending channel with a new lifetime high which is throwing up a bigger target placed around Rs 730.
Interestingly, this kind of breakout on this counter occurred after a multi-month struggle inside the broader range of 590 – 480 kind of levels.
Hence, such a bigger target can’t be ruled out going forward. Positional traders are advised to buy now and on declines up to Rs 625 and look for a target of 697 by placing a stop below 620 on a closing basis.
Yes Bank: Buy | LTP: Rs 372 | Target: Rs 390 | Stop Loss: Rs 360 | Return 4.8%
After the recent correction from the lifetime highs of Rs 394, this counter appears to have bottomed out at the recent low of Rs 356 and resumed its up move.
As the long-term trend is buoyant in this counter it can be expected to retest its lifetime highs. Hence, positional traders should buy into this counter for a target of 390 with a stop of 360.
