Shrikant Chouhan of Kotak Securities is of the view that the mid-cap and small-cap indices will soon begin to follow the benchmark indices trend.
“If the positive sentiment continued, the mid-cap and small-cap indices are likely to outperform. However, in uncertain and volatile conditions, traders may prefer to exit out from the overvalued valued and weak small-cap and mid-cap stocks,” the head of equity research (retail) says in an interview to Moneycontrol.
On the Nifty50, the technical chartist with over 24 years of experience in the areas covering equity research and derivatives research says technically, the chances of reaching a level above 20,000 are higher than going to a level of 15,000 again.
Excerpts from the interview:
Pharma outperformed the broader markets and other sectors in the last one month, with the Nifty Pharma index up 1 percent. Do you think it is the beginning of northward journey in the space?
After a short-term correction, the Nifty Pharma index took the support near 12,200 and reversed sharply. Despite tepid market conditions, it held the positive momentum. However, the short term texture of the index is still non-directional.
Currently, the index is trading near 200, 50, 20 days SMA (simple moving average) 12,983, 12,767, 12,835. If the index succeeds to trade above theses averages, then it will move up to 13,500-13,600.
Amid pharma stocks, we are selectively bullish. If the index holds the positive momentum, frontline pharma stocks are likely to outperformed.
Nifty50 has been rangebound after falling from 18,100 levels in last one month. Do you expect the southward journey in coming weeks or is it just a consolidation for making a big up-move?
Also read – Global economy will bounce back post deflation, says Old Bridge Capital’s Kenneth Andrade
In Samvat 2078, the benchmark indices recorded volatile and rangebound movement between the 18,500 and 15,500 levels. During the year, Nifty/Sensex crossed the 18,000/60,000 mark multiple times but due to uncertain global cues and continued profit booking at higher levels from FIIs, it failed to sustain above the same.
After a roller-coaster price action, currently, the Nifty and Sensex re trading near the 200-day SMA (simple moving average) at 17,000/57,000. We are of the view that the medium-term market structure is volatile and non-directional perhaps traders are waiting for a breakout on either side.
In the near future, 16,500-16,000/55,000-54,000 will act as a sacrosanct support zone while 18,000-18,500/60,000-61,500 could be the major hurdle zone for the bulls. If the Nifty/Sensex crosses the resistance of 18,500/61,500 then it would move towards 19,500-20,000/64,500-66,000.
On the other hand, a 16,000/54,000 dismissal could send the market to the 15,000/51,000 level in the worst case.
Even though we have seen rangebound market, we feel our market outperformed despite constant selling pressure from FIIs, INR falling to 83, an extensive war between Russia and Ukraine and a rate hike from RBI.
Technically the chances of reaching a level above 20,000/66,000 are higher than going to a level of 15,000/51,000 again.
Realty sector hit hard among sectors, falling nearly 12 percent in last one month. Do you expect the worst is over?
In the last month, the realty sector corrected sharply, shed over 12 percent. Technically, long bearish candle on monthly charts and lower top formation on daily charts indicating further weakness from the current levels. However, due to temporary oversold conditions, we could expect strong possibility of one quick pullback rally from the current levels.
Considering the overall texture, buying on dips and sell on rallies would be the ideal strategy for the positional traders.
Also read – Top 10 trading ideas for next 3-4 weeks as volatility rules Dalal Street
The Indian rupee continued to trade below 82 against the US dollar for a week now. Do you expect further deterioration in the currency?
It will depend entirely on the movement of the dollar index until the Fed meets in December 2022. We need to see if inflation is peaking in the US. We think we may get some clarity on this by December 2022.
What are the monthly charts telling you about Midcap and Small cap indices?
After a promising medium term uptrend rally, currently, the broader market activity witnessing rangebound activity. Post short term correction, the midcap and smallcap indices witnessing positive consolidation formation. We are of the view that, the midcap and smallcap indices will follow the benchmark indices Nifty/Sensex trend.
If the positive sentiment continued, midcap and smallcap indices are likely to outperformed. However, in uncertain and volatile conditions, traders may prefer to exit out from the overvalued valued and weak Small Cap and Midcaps stocks.
Do you expect Nifty IT index to take significant support at 26,000 level and do you see any sign of sharp rebound considering monthly charts?
In this year so far, the IT index corrected over 25 percent. The medium term texture of index is weak and oversold. Technically, after medium term correction, the index has formed double bottom formation on daily and weekly charts.
On the lower side, it is consistently taking support near 26,500. We are of the view that, in the short run, for the fresh uptrend rally, it may take time.
As the formation develops slowly and gradually. However, if the view is of medium to long term then we should be buyer at current levels.
Disclaimer: The views and investment tips expressed by investment 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.
