The rupee managed to break below seven-week range and in the process, it breached below the low of the bullish bar seen in the third week of January.
The dollar is expected to inch towards its January 2019 lows near the 69.20 mark, and the broader charts of Nifty IT index suggest weakness, Pritesh Mehta, Senior Vice President – Research at YES Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q. The Nifty closed above 11,000 for the week ended March 8 despite some profit booking seen in the last two days of the week. Do you see the momentum continuing in the coming week as well?
A. Well, the inability to break above the 11,100 level should not be the reference point of the previous week’s action. Despite the short-comings of the last two sessions, the index managed to sustain above the big green bar (Tuesday’s upmove) led by strength in BankNifty.
In fact, following are the highlights for the week – the Nifty notched up gains of 1.6 percent, showing remarkable resolve in holding ground above Tuesday’s peak.
Indian indices also managed to outperform their global peers (US indices were down by more than one percent and major emerging markets lost over two percent this week).
Also, it has not retraced below four-digit Gann number of 1089(0), a discernible sign of strength. Intra-day declines have resulted in sharp recoveries.
As per the Gann analysis, the Nifty is knocking at the doors of resistance. Currently, it's attempting to surpass multiple Gann supply points (i.e. 11,000 and three-digit Gann number of 11,100).
A decisive move is required to break past the hurdle and confirm a shift in the orbit on the upside. The appearance of a bullish candle with a close above 11,000 has ensured highest weekly close since October 2018.
Despite the failure to break above the recent peak, the index has been consistently holding above 11,000 mark.
Such a type of price structure can be viewed as a pause after a recent advance. It also implies that a big move is on the horizon once it decisively breaks above the 11,100 mark.
Q. What are you view on stocks which have bounced from February 19 when Nifty hit an intraday low of 10,585. As many as 60 stocks in the NSE 500 index rose 20-90 percent which include names like HCL Infosystems, Jaiprakash Power Ventures, Suzlon Energy, PNB, Corp Bank etc. among others. Are they ripe for a sustained rally?
A. The Nifty Midcap-100 index has rallied by over two percent this week as it continues its ascent from the support of its four-year mean. The same coincided with the point of polarity zone (i.e. peak of October 2016), which is now acting as major support.
Earlier in October, it marked a low around the above-mentioned zone and bounced back. Price equality is seen around 16,000 mark of the previous fall seen in 2018.
Post a four percent move in March, sustenance above three-digit Gann number of 169(00) is essential for midcaps to continue recent momentum.
Rather than focusing on beaten-down stocks, the focus should be on quality midcaps names should be the desired approach.
Q. What are your views on rupee which hit a fresh two-month high against the dollar? Will IT and pharma remain under pressure?
A. The Indian rupee managed to break below seven-week range and in the process, it breached below the low of the bullish bar seen in the third week of January.
However, in Friday’s trade, it marked a low of 69.81 before staging a sharp rally. Despite Friday’s fag-end recovery, it continues to face hurdle around its downward sloping trendline, suggesting short-lived moves. We expect, USD/INR to inch towards January 2019 low near 69.20 mark.
The broader charts of Nifty IT index suggest weakness. It has reversed from PRZ of a bearish BAT pattern, indicating weakness after its recent underperformance.
In this week’s decline of 3 percent, it also fell below the peak of the month of January 2019, signaling further declines.
Q. Any sectors which are looking attractive on the charts and why?
A. The Nifty Private banks are leading the way. Since 2013, the ratio chart of Nifty Pvt Bank index/Nifty has been trending higher. It has a tendency of going through shallow corrective phases, followed by a sharp recovery.
In the current set-up, the ratio corrected from 1.41 to 1.30 within 4 months. But, it took support around its 3-year mean and quickly staged a recovery.
The ratio chart indicates that the ongoing trend of outperformance of private banks is likely to continue.
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