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#39;Political uncertainty to keep mid smallcaps volatile, better avoided for 2-3 months#39;

October 08
10:29 2018

As per momentum oscillators, the market has entered deeply oversold levels, at which, fresh shorts are not suggested as the risk-reward would not be favourable, Manav Chopra, CMT, Head of Research, Indiabulls Ventures tells Moneycontrol’s Kshitij Anand. Edited excerpts:

The Nifty 50 seems to be in the bear grip. It also marked the sixth weekly decline on charts. Is it time to go short on the index? If yes, what will be the target and stop loss which one should keep in mind?

As per momentum oscillators, the market has entered deeply oversold levels, at these levels fresh shorts are not suggested as the risk-reward would not be favourable right now.

The levels of 10,150-10,200 might act as a cushion on further declines. If the market faces any support at these levels we may witness a relief rally up to 10,500-10,600 levels.

The same is expected in BankNifty, instead of taking a fresh short position one should try to exit from shorts if BankNifty stabilises 23,900-24,000 might act as a cushion for further decline.

How are markets looking on technical charts? What are the other parameters which investors should watch out for next week?

On weekly charts, RSI is nearing long-term bullish support levels of 40. Historically, these levels have been good support in the bull market and even in the bear market these level generally leads to mean reversion rally.

We expect Nifty to mean revert towards critical moving averages which are placed around 10,700-10,800 levels (200-DEMA placed around 10,779).

What is your view on small and midcap stocks? They have fallen over 20% from their highs, does this signal they are in a bear market?

The intermediate trend for the mid and small-cap indices are down. The Nifty mid-cap index has breached its July 2018 low of 4,700 and started making the lower top, lower bottom formation.

The level of 4,700–4,800, which are acting as support for quite some time in the Nifty Mid-cap index now might act as a strong hurdle on the way up.

On the other hand, uncertainty due to the upcoming political election may continue to cause volatility in the mid and small-cap space, better to avoid them for the next two-three months.

 

Disclaimer: The views and investment tips expressed by experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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