With regards to the NIFTY SMLCAP 100 index, we are witnessing an indecisive candlestick on the weekly scale which indicates some consolidation, says Kothari.
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We don’t expect any extraordinary run in the midcap space, but yes there could be a rally of 20-30% in the coming months. In short, we are optimistic on broader markets, Mehul Kothari, AVP – Technical Research at Anand Rathi said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q) Although it was a short week but the volatility remained high with Sensex and Nifty touching crucial resistance levels and then retracing back some gains. What led to the price action?
A) Indeed, the truncated week was highly volatile but this has been the norm now for the Indian markets since the Indian volatility index (VIX) is constantly near 20-zone. With regards to the price action, there were no specific triggers but the activity by participants resulted in such moves.
If we look at the FII data, they have been sluggish in cash markets for the past three sessions. In fact, on March 31, there was heavy selling by them in the cash segment.
On the other hand, derivative stats, too, indicate that on March 31 when Nifty corrected, they were sellers in index futures to the tune of around Rs 2,500 crore.
Q) What is your view on the small & midcap space?
A) With regards to the Nifty Smallcap 100 index, we are witnessing an indecisive candlestick on the weekly scale which indicates some consolidation.
However; the Nifty Midcap 100 index has a ‘Golden Crossover’ on the weekly scale. Previously, it happened in 2014 when BJP came into power. That was an exceptional event and as a result, the index surged over 170 percent from there.
This time there is no such event and hence we don’t expect similar kind of extraordinary run, but yes the midcap space could rally 20-30% in the coming months. In short, we are optimistic about broader markets.
Q) Sensex could end flat for March but 2 sectors that stood out were IT, and Basic Material – up over 5% each. What led to the price action in these sectors? Do you think this outperformance could continue in April as well?
A) The primary reason we feel for Nifty IT to outperform was the halt in appreciation of the USD/INR. In fact, if we go by the charts of USD/INR, it is visible that 72.00 is very strong support for the currency.
Until this support is not breached there is a possibility for rise (INR depreciation) in the pair. This could keep IT stocks in the limelight.
With regards to basic Material (METALS), we saw a price hike happening along with strong demand. That’s why they rallied but if we go by the long-term chart of the Nifty Metal index it can be seen that the index is now trading near a decisive hurdle. Hence, we are of the opinion that despite the strong price action one should refrain from this sector for the time being.
Q) Telecom, and Realty sector fell by about 6% in March – what led to the price action in these sectors? Do you think this underperformance could continue in April as well?
A) Telecom sector is volatile due to various issues related to spectrum auctions and the start of a 10-year payment for AGR dues. Although the basic business data is good sector macro headwinds remain for the short term.
For Realty, concerns on COVID second wave have dampened sentiments as the sector was just looking forward to the nascent recovery. So there could be further hiccups in both the mentioned areas.
Q) 10-years data suggest that bulls remained in control at least in 7 out of the last 10 years in April. How is April likely to pan out for investors?
A) Yes, the seasonality index of NIFTY depicts that 20 years; 10 years and 5 years average of April months has been great for the bulls.
With a mediocre performance in March 2021 even we expect the markets to head north unless 14,000 remains intact for the Nifty.
Apart from investors more importantly the markets have been good for traders wherein bulls and bears are getting opportunities. However, the bigger trend remains bullish and likely to remain as it is in April too.
Q) As we step into FY22 what would you advise investors? Sensex, and Nifty rose by about 70% in FY21 and a similar performance is unlikely in FY22.
A) Since the question is about the entire FY22 we would share a broader technical view for the index. After the index Nifty made a new life-high above the peak of the year 2020, we have entered buy-on-dips markets on a larger time frame.
In case of any major negative triggers, we expect the zone of 13000 to act as strong support for the coming few months.
On the upside, considering a breakout above 12400 from the bottom of 7500 we expect a target of around 16500 – 17000 for the Nifty. This might happen gradually but that is where we see the index.
Q) Any 3-5 technical ideas for the next 3-4 weeks?
A) Here is a list of our trading ideas for the next 3-4 weeks:
Hero MotoCorp: Buy| LTP: Rs 2,958| Stop Loss: Rs 2,800| Target: Rs 3,200| Upside 8%
The weekly chart of Hero MotoCorp depicts that recently the stock corrected from the top of 3600 towards the bottom of 2900. Since then the stock is in a strong uptrend.
The recent fall can be termed as a corrective move. At this juncture; the stock is hovering near its demand zone from where we have seen the stock rising higher.
Also, it is trading near its previous swing low of 2732 which makes the risk-reward ratio more lucrative. The weekly RSI is showing hidden divergence and that suggests that the stock might not sustain at lower levels from here on.
Hence, traders are advised to buy the stock in the range of 2950 – 2900 with a stop loss of 2800 for the upside potential target of 3200 in 3 – 5 weeks.
Balrampur Chini: Buy| LTP: Rs 214| Stop Loss: Rs 190| Target: Rs 250| Upside 16%
Recently Balrampur Chini confirmed a breakout from its multi-year high of 200. This breakout has occurred after a consolidation of 14 years. The theoretical target for the same comes around 340 levels in the longer run.
However, in the short-term, the stock travelled above the 225 mark and is again available near 210 due to the correction.
Even for the short-term traders, the current price is having a decent risk-to-reward ratio for an upside of around 15% to 29%.
Thus, traders are advised to buy the stock in the range of 214 – 206 with a stop loss of 190 for the upside potential target of 250 in the next 3-5 weeks.
Bank of Baroda: Buy| LTP: Rs 75| Stop Loss: Rs 68| Target: Rs 85| Upside 13%
Following the rally in the entire PSU pack, Bank of Baroda underwent a fantastic rally from 64 to 99 in a span of just three weeks.
Post the rally, the stock corrected and is now trading near 70 mark. On the daily chart, it is trading near the previous demand zone.
On the weekly scale, it is resting at a Ichimoku support. The price action indicates that PSU Banks are preparing for a fresh upside.
Thus, traders are advised to buy the stock in the range of 75 – 72 with a stop loss of 68 for the upside potential target of 85 in the next 3-5 weeks
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.
