'D-Street will welcome FM's comments but may face pressure around 200-DMA'

Comments from the FM has undeniably given hopes to the market to rally towards upward territory but if we look from the technical point of view, first line of defence for the bulls is placed near 11,200 in the proximity of 200-SMA, Dyaneshwar Padwal – AVP, Technical Analyst at KIFS Trade Capital, said in an interview with Moneycontrol’s Kshitij Anand.

Q) FM comments coming in the post market hours on Friday are in line to restart the growth engine in the economy. Do you think this will be enough to change the sentiment and reverse the direction of D-Street?

A) FPI withdrawing money is one of the reasons contributing to the bearish movement but there are multiple other factors as well like economic slowdown, weak consumer demand, a slowdown in the global markets that reflect the recent correction in D-Street.

What has come from the FM at the moment is undeniably giving hopes to the market to rally towards the upward territory. Undoubtedly withdrawal of enhanced surcharge on capital gains and angel tax provision, upfront release of Rs 70,000 crore capital for PSU Banks and simplifying GST filing norms will boost the investor sentiment and that impact will be seen on the Monday trading session.

But, if we look from a technical point of view, the first line of defence for the bulls is placed near 11,200 in the proximity of 200-Simple Moving Average.

Q) Will recapitalisation of PSUs lead to a relief rally?

A) Investors should not look at the short-term perspective in PSUs as the implementation will take some time and it will definitely have a positive impact in the long run if fundamentally strong stocks are selected in the portfolio. All these factors will discount in Monday's trading session.

Q) Another muted week for Indian markets weighed down by both global and domestic cues. The Nifty50 had a touch and go moment with 10,862 which if broken it would have turned Nifty in the red for the year 2019. What is your outlook on markets for the coming week? Is it time to remain seller on rallies?

A) Looking at the current chart structure, the intermediate trend is on the lower side, and on the higher time frame chart, the trend is negative.

The Nifty index took support near 10620 in the proximity of 61.8% retracement of the previous rise, and we may expect the index may unfold into a corrective pattern and march towards 11,200 in the coming week.

The first line of defence is placed near 11,200 which is in the proximity of 200-day moving average. If bulls manage to sustain above the mentioned level then only we may see the further escalation towards 11500.

If the bulls fail to do the same then it would lead to intermediate trend resumption. Strong support for the index is placed near 10,600.

Q) More than 500 stocks hit a fresh 52-week low on the BSE on Friday mostly from the small & midcap space. What should investors do if they hold any of them in their portfolio – exit the stock, buy on dips or stay put?

A) We have observed from the start of the year then the small and midcap stocks have underperformed the key benchmark index. If the momentum starts price tends to remain in motion more or less in the same direction.

We may see downward rally for another 2-3 weeks. Investors who already have small and midcap stocks in the portfolio for long term point of view are advised to hold the portfolio but investors who are planning to take new entry are suggested to wait for further correction.

Q) What is your call on the rupee which has already hit 8-month low? It is down by about 4.6% so far in August. Where is the currency headed in the near term?

A) On bigger time frame USD/INR is seen in a clear uptrend. The recent downward movement had unfolded into a corrective pattern from November 2018 but the strong recovery is seen on the monthly price chart and we are expecting upward rally towards 74 level.

Q) Any big triggers which investors have to watch for the coming week?

A) There would be few important announcements which traders and investors should look for like - FM’s presentation to PMO which includes policy interventions for the capital market, the auto sector, real estate & SMEs, a rollback on FPI surcharge, suggestion on tweaks for LTCG.