Implied Volatility, Nifty, Sensex
After last Friday’s rally, the market needs to see follow-up buying this week, otherwise last week’s low of around 16,750 will get broken in the next couple of weeks, shares Vishal Wagh of Bonanza Portfolio in an interview to Moneycontrol.
With more than 13 years of experience in the capital market dealing in technical analyses and derivative strategies, the research head at Bonanza Portfolio says that since the Nifty Smallcap 100 and the Midcap 100 are underperforming the Nifty, one can see a correction in the broader market from the next week onwards.
Smart money may start moving in to large-caps and defensive sectors from small and mid-caps, the expert feels. Excerpts from the interview:
Technically, do you expect the market to remain in a range below its record high?
Last Friday’s sharper and shorter rally is a practical nature of the bear market relief rally. The market was in the oversold zone. So, a weekend pullback is more or less in line, especially, after monthly expiry and RBI policy events. But this kind of rally normally gets fizzled out. One needs to see follow-up buying next week else this week’s low will get broken in the coming couple of weeks. On the higher side, 17,400 will work as resistance.
Are the charts telling you that Bank Nifty will hit the 42,000 mark in the coming weeks?
Normally, when a higher interest cycle starts the interest-sensitive sectors remain under pressure. Technically, a chart has formed lower low lower high formation by Bank Nifty.
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At the same time, the current correction is led by Bank Nifty so bounce back will be very slow. It is likely to underperform largely. So, 42,000 may take more time than expected.
Do you see the broader markets strong enough to outpace the benchmarks in the coming months?
The Nifty Smallcap 100 and Midcap 100 are underperforming the Nifty. So, from next week onwards one can see a correction in the broader market. The smart money may start moving to large-cap and defensive sectors from small and midcaps.
Do you think the buy-on-dips is the right strategy now?
In the corrective market, the buy-on-dip strategy always works for fundamentally stronger and low beta stocks. Normally overbought stocks get higher punishments in correction.
Also read – Market may not slip into bear territory though possibility of near-term turmoil remains, says this CIO
So, from a layman’s perspective, it is better to wait for the dust to settle down and then try to do some bottom fishing instead of buying on dips.
Realty was the biggest loser among sectors in the recent fall. Is it looking oversold now and hence the time to bet?
Realty looks as pump and dump mode specifically in the last pullback rally from 15,100 to 18,050. One should avoid this kind of high beta sector for buying.
FMCG was the clear outperformer in the recent correction. Do you expect outperformance to continue and should one add positions in the space?
FMCG is playing a major role as a defensive sector. So the money will chase a place to hide. Yes, surely one should start searching for a money parking place.
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