If the market in its own wisdom decides to breach 9900 level then major support appears to be in the zone of 9736 – 9685 levels, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said in an interview to Moneycontrol's Kshitij Anand.
If the market in its own wisdom decides to breach 9,900 level then major support appears to be in the zone of 9,736 – 9,685 levels, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said in an interview to Moneycontrol's Kshitij Anand.
Q: It was a volatile week for Indian markets and a lot has changed on the charts. The Nifty broke below its crucial 200-DEMA and 10,000 level for the first time since October 2017. Do you see the further pain in the market for the coming week?
A: First four day’s price action of Nifty50 was almost neutral with two positive pull back candles and two bearish candles. But, Friday’s huge gap-down move accompanied with the global uncertainty created havoc on Indian markets.
This has technically tilted the balance in favour of bears who are already on a rampage since February 2018. However, as the market already corrected in the last two months with a price damage of around 10 percent the incentives for bears after Friday’s gap down opening appears to be little.
Hence, around current level which is close to critical 38.2% retracement level of entire rally from December 2016 lows of 7893 to 11171, some sort of stability can’t be ruled out.
However, if the market in its own wisdom decides to breach 9900 level then major support appears to be in the zone of 9736 – 9685 levels.
Interestingly, on the price chart, around August 2017 Nifty50 spent considerable time as it consolidated between the levels of 10135 to 9685 levels for 8-weeks before breaking out. Hence, 9700 level assumes a lot of significance and can be considered as a sacrosanct support on the downside.
Q: How are FIIs positioned in the market? Do you think the Fed rate hike and fears of trade war could push them to change their stance towards Indian markets?
A: In February foreign institutional investors (FIIs) remained net sellers to the tune of 11037 crore but in March till 22nd they remained net buyers to the extent of Rs 8368 crore before Trump tariff mania hit the market like a thunderstorm.
It means in March FIIs were bit positive and Fed rate hike is almost known to everyone in the market and was well factored in prices. But, now there is a lot of uncertainty on account of newly started Tariff war.
But, when we look into the trade statistics one will be compelled to conclude that India may not go to be impacted by this in the long run.
If we go by statistics India is the 9th largest trading partner of USA and maintains a miniscule trade surplus of around USD 23 billion, unlike China which has a huge trade surplus of around USD 375 billion.
Hence, we believe that FIIs may not worry on account of these two factors unless Trade Wars escalate and more members like China, European Union etc. also start retaliating against the USA which will certainly lead to a slowdown in the world economy.
FIIs may worry more about domestic issues going forward. One is on PSU Banking front. Post Nirav Modi saga which should become a blessing in disguise provided government moves ahead and implement radical reforms in PSU Banking space and aggressively consider selling atleast some of the smaller banks to private players and set an example that they are committed to the hardcore reforms when it becomes the need of the hour.
This may provide a much-needed fillip to the domestic economy and also help in winning over the confidence of Foreign Investors.
The second domestic issue which may bother FIIs is 2019 general elections as recent electoral results are suggesting new alliances emerging which has the potential to strongly challenge the existing government in 2019.
In that case, lack of political alternative or strong government may temporarily keep the FIIs in dilemma about investments in Indian markets.
Q: What should be the ideal strategy for mid & small caps which are underperforming benchmark indices by a wide margin?
A: Mid and small cap space already take a severe knockdown. As growth visibility is improving and fundamental news flows are strengthening about Indian economy investors should focus on quality from this space and make use of this correction to accumulate stocks at lower levels preferably now and on declines up to 9700 in a staggered manner.
Q: What should be the strategy -- buy on dips or sell on rallies in the coming week?
A) Long-term trends for Indian markets are still positive and the current correction can be a multi-month corrective phase inside a long-term bull market.
Even in this bull market since 2014, we have seen vertical rallies as well as multi-month corrections on a couple of occasions.
For instance in 2015 after a vertical upmove of 13 months from the lows of 5933 market topped out at a high of 9119 in March 2015 and was in corrective mode for next 11 months.
Similarly in September 2016 market took a breather for 4 months. And, now after witnessing 13-months of vertical up move from the lows of 7893 to 11171 we hardly spent 2 months.
Hence, the present correction has a lot of time to spend before ushering in a big upmove and time-wise can last for another 2-3 months.
But, the bull market is certainly not over and hence dips should be bought into for one more leg on the upside which should take indices beyond 11200 levels over a period of time.
Q: Top 3-5 stocks which are looking attractive at current level based on technical?
A) Even in this carnage, there are certain scrips which managed to keep their head above the water and hence can be considered for long side trading in next week.
JK Lakshmi Cement: BUY | Target: Rs 503| Stop loss: Rs 405| Return: 11%
For the last couple of weeks, this counter was in consolidation mode in the range of Rs 440 – 410 levels and appears to have broken out of this range in Friday’s session. Hence, traders can look for a target of Rs 503 and consider buying now and on declines up to Rs 425 with a stop of Rs 405.
Pidilite Industries Ltd: BUY | Target: Rs 970| Stop loss: Rs 885| Return: 7%
This counter appears to be in a pause mode after a vertical rise from the lows of Rs 858 to Rs 924 levels. As long-term trends are looking quite attractive and the fact this scrip is consolidating near to its lifetime highs there is more upside once it breaks out of the range.
Hence, this corrective phase should be utilised by traders to go long in this counter for an initial target of Rs 970 with a stop loss of Rs 885.
Power Grid: BUY | Target: Rs 211 | Stop loss: Rs 187| Return: 8%
With seven months of correction from the highs of Rs 226, this counter appears to have hit a bottom after retracing 62 percent of its last leg of the rally from the November 2016 lows of Rs 166.
Correction at recent lows of Rs 190 appears to have ended in this counter as it started building a base in a narrow range of Rs 190-199 levels.
Once it breaks out above Rs 199 then a fresh leg of uptrend shall start with an initial target of Rs 211. Positional traders should buy into this in anticipation of such a breakout, and a stop loss advised for the trade will be Rs 187.
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