Tirthankar Das, technical & derivatives analyst (retail), Ashika Stock Broking, expects the Nifty to scale 18,900-19,000 by December but has doubts about the index holding on to the level.
Das, who has more than 15 years of experience in analysing equities, commodities and derivatives, said after registering a low of 16,747 in September, the Nifty has been rising continuously, which may lead to profit booking at higher levels.
The India VIX index, which measures fear in the stock market and hit a 14-month low of 11.88 points recently, would be influenced by two important factors—the Q3FY23 performance and budget expectations, he said. The index would likely begin to inch up from December end, Das said in an interview to Moneycontrol. Edited excerpts:
Do you expect a Santa rally in the December series to take the Nifty above 19,000?
The Nifty endured its northbound journey for the second consecutive month in a row, tracking buoyant global cues, weaker-than-expected US inflation readings, strong Q2FY23 results, a fall in the dollar index, and softening bond yields. Foreign investors, too, have infused close to Rs 27,396 crore in Indian equities, so far, this month. This came following a net outflow of just Rs 8 crore last month and Rs 7,624 crore in September.
Against such a backdrop, we continue to maintain a positive outlook on the benchmark Nifty and expect it to scale 18,900-19,000 level by December 2022 gradually. However, sustainability remains doubtful, as the Nifty, since registering a low of 16,747 in September 2022, has been on a continuous rising spree, which might invite profit booking at higher levels.
Also read: Sensex scales record high | How to make the most of your investments
The India VIX is at a 14-month low. What does it indicate and is there a possibility of the index slipping below 10?
The India VIX index hit a 14-month low of 11.88 points, factoring that in, India is better placed in comparison to other global Indices in terms of inflation and economic and corporate earnings growth. Such a low reading is suggesting a low-risk perception among participants. However, the index declining below 15 points in recent history tended to be an omen for sharp drawdowns in equity markets in the subsequent months.
Like the one in February 2020 when the volatility index was trading below 15 before COVID-19 crept in. Hence, this implied volatility is very susceptible to directional movement and one should remain cautious at the current juncture.
Going forward, two important factors likely to influence the India VIX (are) Q3FY23 and budget expectations. In this context, one can expect the India VIX to start increasing from December-end onward.
The Bank Nifty climbed the psychologically vital 43,000 mark. Do you think the banking index is can move towards 50,000 in the next calendar year?
The Bank Nifty marked a fresh all-time high of 43,339 and outperformed the frontline indices as it surged by almost 34 percent since registering an elevated base of 32,290 in June 2022. The up move was broad-based, as both PSU and private banking stocks witnessed a healthy gain.
Currently, among the constituents of Bank Nifty, 91 percent stocks are trading above their long-term moving average, ie 200-DMA (day moving average). While 83 percent of the index constituents are trading above their short-term moving average, ie 20-DMA. This indicates overall bullish sentiments in the banking space.
With rallies getting faster and corrections shallower, it indicates inherent strength in the index. Momentum indicators, too, are indicating a strong bullish momentum in the index.
Even the PSU banking index has broken out of the falling trendline, indicating an end to the 12-year-long bearish trend. Projected retracement from the last recognisable correction in the Bank Nifty i.e. since October 2021 till March 2022 indicates that the index is most likely to head higher, initially towards the 161.8 percent retracement level at 47,800 in the next calendar year and with successive trade above it which might strive for the psychological 50,000 mark.
Also read: Sensex simmers with 26 stocks trading above their 200-day moving average
The Nifty IT index is trading above the 30,000 mark. Will the index recoup its losses in the coming year?
The IT index has witnessed a correction of over 30 percent from its all-time high of 39,446. The long-term chart since 2007 uncovers that the rally has been amidst the rising channel, providing the necessary breakout. The index is now at a point where it retested the arrangement and is on the process to haul up.
On the oscillator front, historically the level of 40 for 14-period RSI (monthly time frame) played havoc with the index and provided a vital pullback. Hence presently, the index is at a critical juncture where a pullback seems eminent.
The Indian IT index, a great follower of the Nasdaq 100, has also been witnessing signs of bottoming out and rallied by almost 3 percent last month amid hopes of less aggressive interest rate hikes by the Federal Reserve. Hence, one can expect that the long-term downtrend might have ended and a phenomenon rally is most likely.
Initially, the Nifty IT is likely to challenge the 61.8 percent retracement of the entire decline since January 2022 at 34,380. However, the present setup indicates that the index is on the path to recoup its entire loss in the coming years.
What are the general technical parameters you follow while taking index or stock decisions? What is the best strategy to minimise loss and maximise profit?
I consider myself to be an advent follower of the classical theory of technical analysis where I base my study on Dow Theory. Volume and open interest play an important part while defining the trend. Identifying the price pattern is another important measure to identify stock. The retracement tool aids in identifying trend reversal as well as projecting targets. Longer term outlook is derived through the Elliot Wave and Harmonic principles.
I believe dreadful stock selection invariably incurs losses, so I tend to limit my universe to largecaps and selective midcaps, which might be slow and meticulous but I considered that to be far superior to erratic and sloppy.
Secondly, I believe a successful trader should be apt in identifying a proper risk-reward ratio.
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.
