Surpassing 80 levels is a clear-cut breakout on the USDINR chart, chances are high that USDINR pair could reach the target of 82, Vinay Rajani of HDFC Securities says in an interview to Moneycontrol. The day saw the Indian currency opening to a record low of 81.55 to a dollar.
The ICE dollar Index is rising with momentum and has reached a multi-year high and due to that Indian rupee could also remain under pressure against the dollar for the coming days, he believes.
With more than 16 years of experience in the financial markets, the Senior Technical and Derivative Analyst at HDFC Securities says developments on harts indicate that Nifty could extend the fall, but the probability of market replicating US and Europe markets by breaching June Lows seems lesser as relative strength of the Nifty remains strong.
Excerpts from an interview with Moneycontrol:
Is there any possibility of Nifty50 hitting the June lows in the coming weeks considering the subdued environment?
As they say, ‘we should never say no in the markets’, chances always remain there. However, we need to analyse the probability of Indian markets following the US and European Markets. Last week, we saw world indices like Dow Jones, DAX, CAC and FTSE breaching their respective June 2022 Lows.
In this bleak scenario, the benchmark index Nifty is still placed 14 percent higher from the bottom of 15,183, registered in June 2022. Indian markets have outperformed not only to the US and Europe markets but to almost all emerging markets in the world. Now, recently after long time we have seen, the Nifty confirming lower top and lower bottom formation on the daily charts.
The Nifty has also closed below its 50 days EMA (exponential moving average) support. These developments on charts indicate that the Nifty could extend the fall. However, going by the ratio charts of the Nifty versus world market and the Nifty versus Emerging Markets on monthly time frames, the probability of Indian market replicating the US and European markets by breaching the June Lows seems lesser as relative strength of the the Nifty remains strong.
Supports for the benchmark are seen at 16,983 and 16,640, which happens to be 38.2 percent and 50 percent retracement of the entire rally seen from June lows of 15,183 to recent high of 18,096.
Do you think the IT index will continue to trade in the range of 26,000-30,000 for the rest of the year?
Yes. At present, the IT index is trading near the lower band of the 26,000-30,000 range. The Nifty IT index is down more than 32 percent from January 2022 highs. After a healthy correction and the kind of oversold levels, most of the large-cap IT companies have reached their weekly charts, we believe that downside for IT index in the short term is limited.
From the next month, large-cap IT companies are scheduled to announce their quarterly results, because of that we could see some short covering happening before that event. The rupee has dipped below 81 against dollar which, in a way, benefits exporting sectors like IT and this could also limit the downside for the sector from the current levels.
Will the rupee give Flag and Pole target of below 82 against the dollar in the coming weeks, considering the decisive close above the breakout of the Flag and Pole?
Surpassing 81 is a clear-cut breakout on the USDINR chart. The ICE dollar Index is rising with momentum and has reached multi-year high and due to that Indian rupee could also remain under pressure against the dollar for the coming days. Chances are high that USDINR pair could reach the target of 82.
Given the formation of evening star pattern on the weekly scale, do you see the Bank Nifty falling further in coming days?
It’s not a typical textbook evening star pattern, but yes, we can say that formation is bearish in nature, especially when the Bank Nifty chart has developed a bearish double-top pattern at all time highs of 41,840. There is also a negative divergence on the daily RSI (relative strength index), which confirms the short-term down trend for the Index.
So, yes, Bank Nifty could fall further from here and next supports for the index are seen at 38,192 and 37,065, which happens to be 38.2 percent and 50 percent retracement of the entire rally seen From June lows of 32,290 to recent high of 41,840.
Do you expect the FMCG index to hit 50,000 mark this year?
The Nifty FMCG index is 11 percent away from the 50,000 mark. Last week itself, FMCG Index hit new all-time high at 45,237. On the month ended July 2022, index registered long term bullish breakout above 42,021.
Large-cap FMCG stocks like ITC, HUL, and Marico have been showing significant strength. Though, running corrections can’t be ruled out but yes looking at the positional trend, we believe that the index could gradually reach a milestone level of 50000 by the end of the this financial year.
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