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After the Bell: Gold shines bright! What should investors do on Thursday?

July 22
20:02 2020

The bulls pushed gold to a record high above Rs 50,000 per 10 gm on July 22 while bears infused volatility on D-Street after five-days of upmove.

The Sensex ended July 22 58 points lower at 37,871 and the Nifty fell 29 points to 11,132.

The Indian market recouped most of their losses towards the close of trade, which suggests buying at lower levels, but experts feel the volatility is likely to continue.

The rally in gold and volatility in the equity market could be related.

“Gold has rallied to record highs above Rs 50,000/10 gram reflecting firmness in the international market amid sharp losses in the dollar, additional stimulus measures and robust investor inflows,” Ravindra Rao, VP- Head Commodity Research at Kotak Securities told Moneycontrol. “Rising virus cases and US-China tensions have also underpinned gold prices.”

The Indian equities remained subdued due to a muted trend seen in global markets amid a rise in COVID-19 related cases as well as US-China tensions. Investors preferred to book profits at higher levels after five straight days of up move, a market participant told Moneycontrol.

“Domestic investors offloaded select stocks after US equity futures fell amid political tensions between the US and China. This led to a sudden decline in the local market,” Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities, told Moneycontrol. He expects the Nifty to weaken if it drops below the 11,050 levels.

The next big question is what should investors do now? Is time to go short or stay put?

Market participants are of the view that traders can avoid creating fresh long positions and wait for a break above 11,232 levels while a close below 10,990 could be seen as the first sign of weakness.

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, advises traders to avoid long positions. “A close below Nifty’s 200-day simple moving average, whose value is placed around 10,863, can confirm a trend reversal in favour of bears. In that scenario, initial targets on the downsides can be towards 10,560 levels. Positional traders with high-risk appetite can consider shorting the Nifty if it trades below 11,000.”

However, he was quick to add that a strong close above 11,238 can take the Nifty towards 11,400 levels.

Also Read: Taking Stock: Nifty holds 11,100 as D-Street snaps 5-day winning streak; Axis Bank up 7%

We have collated views of experts on what investors should do on July 23 when the market resumes trading:

Sahaj Agrawal, Head of Research- Derivatives at Kotak Securities

The Nifty staged a strong rally and conquered 11,150-11,200 levels in the past few trading sessions. There have been broad-based participation with rotation seen across sectors.

Expect volatility to rise as the trend support remains quite far at 10560 levels. We believe banking stocks can outperform in the near term as they have been relative laggards; FMCG and Capital goods can be bought on dips. Profit booking possible in IT stocks.

Ajit Mishra, VP – Research, Religare Broking:

The Nifty has almost tested the 11,250 on July 21 so some consolidation cannot be ruled out. In absence of any major event, markets would continue to take cues from the ongoing earnings season as well as global markets.

Besides, it would await more data on how demand and economy recovery is panning out amid the pandemic. Traders should maintain positions on both sides and limit leveraged trades.

Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas:

The Nifty witnessed a continuation of the positive momentum from the last few sessions. After a gap up opening, the index couldn’t build upon the early gains. It faced selling pressure as the day progressed.

On the downside, as expected, the gap area of 11,113-11,037 proved to be a key support zone. From there the index attempted some recovery towards the end of the session.

On the daily chart, the price action has resulted in a bearish outside bar formation. Going ahead, the index is expected to get into a consolidation mode where the likely range will be 10,900-11,250 for the short term.

Nagaraj Shetti, Technical Research Analyst, HDFC Securities

The Nifty showed higher levels of weakness on July 22 (from the high of 11,238), still, there is no confirmation of any reversal pattern yet at the highs.

The positive chart pattern like higher tops and bottoms is intact and any minor downward correction could be viewed as a part of the higher bottom process. As per this pattern, the decline should halt around 11,000-10,950 levels in the next few sessions.

The near term uptrend status of Nifty remains intact. As long as Nifty holds above 10,950-10,900 levels, we are unlikely to see any major weakness in the market.

Confirmation of reversal pattern at the highs is likely to indicate any important trend reversal in the market. Any short term upside bounce from here could find resistance around 11,250-11,300 levels.

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

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