Buying interest is being seen even near minor supports but if 14,467 is breached decisively, we expect a considerable fall in the market, says Kothari. Traders should remain cautious below that support.
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Mehul Kothari, AVP–Technical Research, AnandRathi, expects the coming week, which will be a truncated one, to be volatile. For the Nifty, 14,800 is the critical support and a breach can drag the index towards the recent low of 14,467.
In an interview to Moneycontrol’s Kshitij Anand, Kothari says till the time Nifty trades above 14,800, small and midcap stocks will continue to outperform the heavyweights. Edited excerpts:
A volatile week for Indian markets but the bulls helped the Nifty close in the green. What led to the price action?
Indeed, it was a highly action-packed week for the domestic markets. The global markets remain muted largely, weighed down by some swings in the US 10-year yields.
On the domestic front, the Nifty spot underwent a remarkable recovery from the low of 14,468 in the first three sessions of the week and made a peak of 15,273.
Later on, we witnessed profit-booking from higher levels, which brought the index below the 15,000 mark towards the close of the week.
Any important events that are lined up in the coming week? Which are the important levels to track?
The coming week has no major events but for Indian markets it is a truncated one, as the exchanges will remain closed on Thursday, March 11, on account of Mahashivratri.
Thus, the weekly expiry would be shifted one-day ahead to Wednesday and hence we could expect some volatility right from the coming session.
On the front of the level, 14,800 on the Nifty50 is critical support. A breach of might drag the index towards the recent low of 14,467.
We are witnessing buying interest even near the minor supports in the markets but this time if 14467 is breached decisively then we expect a considerable fall in the markets. Thus, traders should remain cautious below that support.
Small and midcaps outperformed the benchmark indices. What is powering the rally in the small and midcap space?
In our past interactions we have been stating that there is a phenomenon in which after a significant upside, when the heavyweights go through some profit-booking then at that time the buying interest is diverted towards mid and smallcaps.
This is exactly what has happened in the week gone by. In fact, very recently, the Nifty Midcap 100 has confirmed a breakout on a larger degree chart.
Therefore, we maintain our stance that till the time Nifty trades above 14,800, the broad market outperformance is likely to continue.
Technicals indicate that gold may be entering a bear phase. What is your call on the yellow metal in the short term?
At this juncture, international gold is hovering near the $ 1,700-mark. Technically, it is at a confluence of many supports like rising trend line, support of the falling channel, and also 61.8 percent retracement from the top.
Thus, we are of the opinion that 1,660–1,650 would be strong support for the coming weeks. We expect a bounce towards the 1,800-mark purely on technical evidence.
Metals, energy as well as banking stocks have remained in focus. What is leading to the price action?
The above-mentioned sectors remained in the limelight as all are interest-rate sensitive. However, if we talk about the technical factor then the pullback in metals was very much on the cards after their sharp run-up.
Here in India, the Nifty energy sector outperformed many sectoral indices due to a sharp surge in heavyweight such as RIL, which rallied more than 4 percent during the week.
The banking index remained an underperformer due to selling pressure in private banks and a handful of PSU banks. This space might continue to underperform unless the Bank Nifty crossed the 38,ooo-mark.
Any three-five trading ideas for the next four weeks?
Here is a list of top short-term trading ideas:
Maruti Suzuki: Buy| LTP: Rs 7247| Stop Loss: Rs 6820| Target: Rs 8000| Upside 10%
Maruti corrected from the levels of 8,300 and sneaked below the 7,000-mark recently. It found support near the 6,800 level, which was exactly the placement of its 200-day SMA.
We witnessed some bullish price action around the crucial support and the stock is now again near 7,200. The support near 7,000 also coincides with the extension of a long-term breakout.
The convergence of all the supports at similar levels makes the risk-reward lucrative to go long. Thus, traders are advised to buy the stock in the range of 7,240-7,200 with a stop loss of 6,820 for the upside potential target of 8,000 in the next three– five weeks.
HUL: Buy| LTP: Rs 2200|Stop Loss: Rs 2080| Target: Rs 2380| Upside: 8%
Recently, the stock corrected from the peak of 2,450 and is now trading near the 2,200-mark. At this point in time, the stock is hovering at the placement of 200-day EMA and 200-day SMA, which might act as buying zone.
Further, the support coincides with the placement of a long-term rising trend line. In addition, the stock has the support of Ichimoku Flatline at current levels.
The convergence of all the supports at similar levels makes the risk-reward lucrative to go long. Thus, traders are advised to buy the stock in the range of 2,200-2,180 with a stop loss of 2,080 for the upside potential target of 2,380 in the next three-five weeks.
Piramal Enterprises: Sell| LTP: Rs 1924| Stop Loss: Rs 2025| Target: Rs 1800| Downside: 6%
In February, Piramal Enterprises (PEL) has rallied from the lows of 1,300 to the recent high of 2,007. This has brought it into an overbought zone on a daily scale.
The level of 2,000 has acted as a supply zone for the stock in the past few instances. The 2,000-mark is also the placement of 200 SMA on the weekly time frame and that could be a very strong hurdle.
The mentioned technical evidence indicates that the stock is poised for a considerable correction after the relentless run-up.
Thus, we advise traders to sell the stock only on the bounce in the range of 1,940-1,960 with a stop loss of ,2025 for a downside target of 1,800 in the next three-five weeks.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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