Sensex and Nifty staged a smart recovery on Friday to recoup some of the losses after one of the worst days in nearly two years for the Indian equity market on Thursday (24 February 2022). BSE Sensex and NSE Nifty 50 staged a pullback, surging over 2 per cent, while India’s Volatility Index VIX cooled off over 16%. Relief that the economic sanctions announced by the US and other western nations have so far not included any exile of the Russian economy from the global SWIFT payment system allayed concerns. Additionally, moderation in global crude oil prices was also a sign of relief. Possibility of the US Fed toning down its aggressive interest rate hike pitch going ahead also gave a boost to investor sentiment.
Nifty may touch 16800-16950, but is it sustainable?
“The recent recovery in the market is mainly due to the trigger of stop losses and doesn’t seem to be sustainable. The current geopolitical tension is escalating day by day and going towards worse. Nifty may touch the level of 16800-16950 soon, but if it sustains there for 2-3 days, only then a rebound is expected. Investors may remain cautious till then and follow ‘wait and watch’ strategy and take this opportunity to book their short term positions,” said Ravi Singh, Vice President and Head of ResearchShareIndia.
“Technically, the Nifty 50 is trading below its prior support of 16,800 levels & 200-days Simple Moving Averages, which indicates further weakness. The Nifty may find support around 16,000/15,800 levels while on the upside 17,000 may act as an immediate hurdle for the index. Further any positive trigger from the geopolitical tensions can ease the selling pressure,” Sachin Gupta, AVP Research, Choice Broking.
Short-term investors must keep stoploss at 16,000
“The US on Thursday stated that NATO will not go to Ukraine. Additionally SWIFT sanction has not been not applied, and the energy sector has been kept outside from sanctions leading to positive movement in Indian stock markets today. Investors can invest here and below levels also. Short-term investors are advised to keep a stop loss at 16,000 level,” said Ravi Singhal, Vice Chairman, GCL securities Ltd.
Invest in a bootstrapping manner in high quality blue-chip stocks
“All countries’ economies are connected to each other due to globalization factor and any war escalation will have a direct impact on the Indian economy also. Though Sensex is up and has rebounded today to certain points, it will be in fear until the situation becomes normal. On the other hand, it is always good to invest in a bootstrapping manner in high quality blue-chip stocks where you invest a certain amount on every DIP and take the advantage of tentative fall,” said Anuj Gaur, Director of IBBM (Money maker India Securities).
“In terms of levels, until the Nifty index crosses a level of 17,500 on the upper side, economy will be in fear and the market will remain highly volatile with higher VIX. This type of market gives a good opportunity for professional Option traders because they can take the advantage of downfall. Also, other investors should add some gems in their portfolio in a pyramiding & reverse Pyramiding manner whenever this type of opportunity arises,” Gaur added.
Go all out to buy once Nifty is above the 200-DMA
“Pullback rally today is very much on the expected lines. With the West starting to act with sanctions, bulk of the calculated and foreseeable damage that the war may inflict, stands largely discounted. Another thing responsible for this pullback is the massive shorts that were created yesterday in the previous session. The bulk of the shorts are likely to get covered. However, before taking them as a start of recovery, it is necessary that one keeps broader technical levels in mind. Nifty will face resistance at 200-DMA; unless this is taken out any meaningful pullback will be difficult. As of now, the Nifty is expected to stay largely in a range,” said Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services.
He added, “Investors should buy now, but not invest their entire capital. They can invest a portion of it now so that if there is another corrective wave, they can buy some more. On the other hand, they can go all out to buy once the Nifty is above the 200-DMA.”
Focus only on the quality stocks
“The domestic market rebounded on Friday, after a worst trading day as Russia ordered military operations on Ukraine. The benchmark index opened on a positive note following overnight gains on Wall Street. The Nifty50 index was holding 2.5% gains in morning sessions while Banknifty was up by 3.5% during the first half of the session. Overall sentiments are still looking weak as we are in the context of war with a high level of uncertainty. Hence, investors may trade cautiously and focus only on the quality stocks since the situation remains fluid,’ Sachin Gupta, AVP Research, Choice Broking.
Invest in tranches at current levels
Nishit Master, Portfolio Manager, Axis Securities said, “Geopolitical problems don’t affect the markets for long. This means, any big correction because of geopolitical issues allows investors to invest at lower levels. We believe that the markets will continue to remain volatile and move in a broad range for a few months before starting to move up. Current levels of the market look good for fresh investments. This does not mean that markets cannot correct temporarily, but any fall will be temporary, and bounce back will be swift.”
“Fresh investments can be added in tranches at current levels. We believe Nifty will remain in the broad range of 16,500-17,500 for the most part over the next couple of months before moving up. Any fall below 16,500 should be temporary and should be followed by quick bounce backs. We advise investors to start investing in tranches at the lower end of our expected Nifty range,” Master added.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)
