Vinay Rajani of HDFC Securities
PSU banks and metals are two sectors that appear the most bullish on the medium-term charts and are likely to outperform the benchmark indices, Vinay Rajani of HDFC Securities shares during an interaction with Moneycontrol.
At present, derivative data is neutral for Nifty and does not give any convincing indication for directional up-move, the technical expert says.
Technically, the Nifty has ended December with a bearish engulfing candlestick pattern on the monthly chart, which indicates the probable bearish trend reversal for the short to medium term, he feels.
The Nifty has been forming lower tops and lower bottoms on the daily chart and still placed below 20 and 50-day SMA (simple moving average). Therefore, the Senior Technical and Derivative Analyst with more than 16 years of experience in the financial markets believes that chances of hitting 19,000 in Nifty in the January series is less.
Considering the historical data (for January), and volatility and correction seen in December, do you think the January series is going to be strong for the market, considering the technical as well as F&O data? Do you see any possibility of 19,000 on the Nifty?
Historically, the January series is less likely to remain strong for the markets as there are not enough rationales for bulls from both technical and derivative perspective. If we were to go by the seasonality charts of last 29 years (since inception of the Nifty), performance of January month has been muted with average return of 0.33 percent with more than 50 percent of the time month ending in the red.
However, December is the best performing month as per the historical data.
At present, derivative data is neutral for Nifty and does not give any convincing indication for directional up-move. Technically Nifty has ended the December 2022 month with bearish “Engulfing” candlestick pattern on the monthly chart, which indicates the probable bearish trend reversal for short to medium term.
Nifty has been forming lower tops and lower bottoms on the daily chart and still placed below 20 and 50-day SMA (simple moving average). Therefore, we believe that chances of hitting 19,000 in Nifty in the January series is less.
Considering the sectoral chart patterns, what are the sectors to watch for January?
PSU Bank and Metal are the two sectors, which looks most bullish on the medium term charts and are likely to outperform the benchmark indices. However, FMCG index seems to have lost the strength on the short term charts and could underperform the Nifty.
What is the best F&O strategy one can use to maximum profit and minimise losses in coming week?
Considering the rationales, Bear Put Spread strategy can be initiated in the Nifty. Traders looking to play a directional view with mildly bearish expectation can use the Bear Put spread.
It is advisable to execute Bear put spread by buying Nifty 18,100 Put (January 5, 2023 expiry, CMP Rs 80) and simultaneously selling 17,900 Put (January 5, 2023 expiry, CMP Rs 27). Maximum profit in the strategy would be Rs 7,348 and maximum loss would be Rs 2,652. Risk Reward Ratio for the strategy would be 1 : 2.77.
Technically, do you see more run up in Nifty PSU Bank index that rallied 6 percent in current month so far?
Yes, PSU banks are expected to outperform the Nifty. The magnitude of the rise may not be that high, which was there in last three months but gradual rise can be expected from the PSU Bank sector.
However, if Nifty were to break 17,800 support, then PSU banks could also witness running correction. As they say “Dance on the floor, but near the door”, traders are advised to remain nimble footed in the month of January.
The biggest gainer for the month is Fertilisers and Chemicals Travancore (FACT). Do you think it is overbought now? What should investors do with this stock?
RSI (relative strength index) Oscillator for monthly and quarterly charts of fertilizer stocks have turned overbought and therefore it is advisable to take some profits off the table. Profit booking after such exceptional rise can not be ruled out in fertilizer sector.
However, Long term bullish trend remains intact for fertilizer sector as correction are part of the bullish trends.
Which segment will take the lead in January (largecap, smallcap, or midcap)?
Largecap segment is expected to outperform.
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