After the recent correction, Shrikant Chouhan of Kotak Securities says “almost everyone” expects the IT sector to disappoint in Q3 FY2023, and that they’re discounting the results well in advance. He feels the sector may re-test the September low, but won’t go much lower.
Volatility index India VIX should start going down from January, said Chouhan, as the market will face several uncertain events in the first half of the financial year.
In the second half of the year, election fever will raise the voltage in the index, Chouhan, who has 24 years’ experience in equity and derivatives research, told Moneycontrol in an interview.
The executive vice-president of Kotak Securities, who also heads the fundamental and technical analysis research team, said that traders need to be more careful in the coming year as the market is expected to remain highly volatile, in a wide trading range.
Technically, do you think we are in a rangebound market for the next one month, at least? Also, does the Nifty reaching the 19,000 mark by December-end look unlikely?
I would say, before the Q3FY23 numbers and the announcement of the Union Budget, the market will trade in a broader trading range. To cross the 19,000 level, the market will need some powerful positive news flow, which is unlikely.
If Brent falls to $ 70 a barrel, with the dollar index falling below the 103 level, it would be a big relief to emerging markets, in terms of helping improve earnings.
After having a great run towards 44,000, is the Bank Nifty preparing to make a move towards 45,000?
The financial sector has been the top choice on the buy list of FIIs throughout the financial and calendar year. About 45 percent of the total FII inflows are pumped into the financial sector.
Based on this, at the end of the month, if there is any rally in the market, then the Bank Nifty can also touch the 45,000 level. Otherwise, it will remain in a broad trading range between 44,000–42,000.
Are the Nifty IT charts telling you that the index may re-test September 2022 lows in the coming year?
We feel the Street has started gearing up to handle the Q3 FY23 IT sector results. Almost everyone expects the IT sector to disappoint in Q3 FY2023, and they’re discounting the results well in advance. We may retest the September low but not much lower.
Do you see the Nifty Midcap 100 and Small-cap 100 indices hitting record highs in the coming year?
If the macros are favourable and valuations are the only concern for a large section of the market, we may see niche investments in mid and small-cap indices. If earnings are visible for the next 2–3 years in small and mid-cap companies, investors will invest in them.
We may not see huge activity after reaching record highs, but midcap and small-cap stocks will attract investments for sure.
Do you expect the volatility index to linger at the current levels for a longer time?
I do not think so. It should start climbing from January, as the market will face several uncertain events in the first half of the financial year. And in the second half of the year, the election mood will add more voltage to the index.
What is your advice to new traders for the coming year?
Traders need to be more careful in the coming year as we expect the market to remain highly volatile, in a wide trading range. In these types of markets, a trader needs to deal with high probability. The strategy should be to have a smaller volume and multiple transactions, with defined and less-aggressive targets.
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