Options data suggests 15,000 make or break level on Nifty, deploy sell on high strategy: Gaurav Garg of CapitalVia Global Research

Market Outlook

Traders should opt for a sell on high strategy as any significant pullback will be an opportunity to create shorts amid weak technical set-up on Nifty, Gaurav Garg, Head Research, CapitalVia Global Research Limited said in an interview with Moneycontrol’s Kshitij Anand.

edited excerpts:

Q) A volatile week for Indian markets but bulls helped the index to close in the green. What led to the price action?

A) Last week was patchy for traders as markets witnessed huge volatility due to global tailwinds after the benchmark 10-year US Treasury Note yield crossed 1.6 percent level, the highest in more than a year.

Muted commentary from the US Fed Chairman, Jerome Powell, who said that inflation is likely to rise as the economy recovers, led o some profit booking in global markets.

However, institutional inflows were good which helped the index close above 14,900.

Q) Any important events that are lined up for this week. What are the important levels one should track?

A) 15,000 is a make or break level, not only as a psychological level but also carries equal importance as per options data.

Higher India VIX might trouble bulls in this week as volatility might persist. Traders should opt for a sell-on-high strategy as any significant pullback will be an opportunity to create shorts as technical set-up looks weak.

Q) Small & midcap relatively outperformed benchmark indices. What is powering rally in the small & midcap space?

A) Yes, the broader markets performed well as compared to largecaps as they have not participated in the recent volatility.

In my opinion, smart money is shifting in selective mid and small-cap stocks where investors are looking for lucrative valuations and future growth.

Midcap cement stocks, specialty chemical stocks along with PSEs helped broader markets to do well. I believe momentum might continue in this space this week as well.

Q) Technicals point towards the fact that gold might be entering the bear phase. What is your call on the yellow metal in the short term?

A) One of the major reasons behind the fall in gold prices is rising US bond yields which have impacted gold prices in a negative way.

However, I believe that this pressure on gold will be limited to the short-term, and gold prices might take a U-turn.

42,500-43,000 might turn out to be a good range to accumulate gold for the mid to long term. What might help gold prices domestically is the weaker rupee therefore gold might act as an inflation hedger for investors having an investment horizon for more than 12 months.

Q) Metals, Energy, as well as banking stocks remained in focus last week. What is leading to the price action?

A) Base metals especially copper prices hitting multi-year highs built the momentum in metal stocks, as the street is hoping for profit margins to improve significantly in coming quarters.

Public Sector Enterprises (PSE) stocks witnessed traction last week especially power and energy stocks where significant buying was seen. Banking stocks traded with positive momentum during the week but profit-booking in the latter half of the week paused the rally.

Q) Any 3-5 trading ideas for the next 3-4 weeks?

A) InterGlobe Aviation Limited: Buy | Trigger Price: Rs 1,790 | Target: Rs 1,880| Stop Loss: Rs 1700| Upside 5%

The stock is looking bullish on the daily chart as it is consolidating at its prior major resistance which is placed at Rs 1790, breaking this level might show decent upside from current levels

The trend indicator ADX is also showing its start of a new bullish trend in the upcoming week.

Indian Oil Corporation: Buy | Trigger: Rs 104 | Target: Rs 112 | Stop Loss: Rs 99 | Upside 7.4%

The stock is consolidating near its resistance level in weekly charts which is placed at Rs 104. Stock’s action is supported by trend indicator ADX which is indicating bullish momentum in next week.

Endurance Technology: Buy| Trigger price Rs 1415| Target: Rs 1500| Stop Loss: Rs 1374| Upside: 6%

The stock is sustaining above its critical 40-DEMA which is placed at Rs 1380. This might act as a strong support zone. If stock somehow sustains above Rs 1415, it might lead the stock to positive momentum.

The stock has seen a significant addition of volumes in recent days. The risk and reward is favourable at this juncture.

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