ETMarkets Smart Talk: Range-bound market making index trading difficult: Sumeet Bagadia

Edited excerpts from an interview:

Nifty showed support at 17,600 level last week but faced resistance above the 18,100 zone. Do you expect this week to be a sideways market?
Nifty began the week near 17950 and ended very close to the same level, forming a Doji candle on a weekly chart, indicating a bearish trend reversal. The volume profile suggests that the Index may find support in the 17750-17850 range. According to the OI data, the highest call OI was observed at 18000, followed by 18200 strike prices, while the highest put OI was observed at 17900 strike price. Nifty traded in a broad range of 17750-18150 levels. The key levels to watch on the Nifty in the coming week are 17750 and 18150. Nifty also has a support of the middle band of the Bollinger band near 17750 levels, which is acting as a critical support. If the Nifty remains above 18150, it could move towards 18500.

We are just 2 weeks away from the Budget. In which sectors or stocks are you seeing momentum in the run-up to the event?
Budget 2023 is likely to continue to emphasise capital expenditure as a growth driver and to boost manufacturing while maintaining post-pandemic fiscal consolidation. The Budget is expected to maintain the emphasis on domestic manufacturing revival, with PLI schemes for labour-intensive industries likely.

Most importantly, rather than going populist, the Budget is expected to continue to focus on post-Covid fiscal consolidation and divestment and subsidy reduction. With the budget due in about two weeks, the sectors that could benefit include automobiles, construction, consumer staples, sugar, and textiles.

Despite the fact that this is the final budget before the elections, we may not see the government go populist, but rather focus on fiscal consolidation in light of global volatility.

What is the best trading strategy ahead of the Budget?
On the weekly charts, the Nifty formed a Doji candle after failing to close above 18,000 for four days in a row. Throughout the week, there was a tug of war between bulls and bears, with candle wicks of equal size on both ends, indicating indecision among traders.

Traders should wait patiently for prices to break above or below 18,150 to initiate the next actionable move because the market is currently in no trading zone. Traders should use a stock-specific approach because trading in benchmark indices is difficult because the market is range-bound.

Nifty IT was top sectoral performer during the week. What does the chart look like for the week ahead?
So far, IT results have exceeded expectations, alleviating concerns about a slowdown in growth due to macroeconomic headwinds. Though the sector may see further consolidation due to macroeconomic uncertainties, we believe valuations have largely corrected and represent good value at these levels.

NIFTY IT has been range-bound for three weeks, ranging from 28255 to 29000. Currently, the NIFTY IT has closed above the 20 and 50 day EMAs, indicating short-term positive momentum. NIFTY IT continues to face resistance at 29000, as well as the 100 Day EMA, which will serve as a critical level for NIFTY IT to break out in the short run. The RSI on the daily chart is at 51 and has seen a positive crossover, indicating that momentum is in favour of the NIFTY IT.

Which are the top 3-4 stocks that would be on your radar for the week ahead?

Jindal Steel is currently trading at 610 and has been on an extremely strong increase over the last 6 months. Moving averages, particularly the 21, 50, 100, and 200 day EMAs, have been breached. This indicates that the stock is getting traction. Jindal Steel is trading in a favourable rising channel and is poised to set a new weekly high. The RSI Indicator is at a comfortable level of 60, indicating that the stock has excellent momentum and the ability to rise higher. The stock has climbed above the Bollinger band mean and has held the 585 support level. We anticipate that it will advance much further and reach the upper band, which will act as resistance. So, based on the technical structure described above, we recommend a buy at 610, with 600 serving as an averaging opportunity for an aim of 645 to 655 and a stop loss of 580.

M&M
M&M is in strong consolidation zone for last 6 months. The stock has a strong support zone around the1220-1230 zone, which is also supported by 200 day EMA. M&M has recently given an ascending triangle breakout from 1280 levels. The RSI Indicator is at a comfortable level of 64, indicating that the stock has the potential to rise higher. ADX is at 28, suggesting that there is strength in the move and this move will continue further.

So based on the above technical structure, we are recommending a buy at 1328 where 1300 will also be an averaging opportunity for targets of 1420 to 1450 with SL of 1250.

Britannia has corrected from its record high of 4537 and has retested a key support level of 4230, which is also a 50 Day EMA. The stock’s immediate resistance is located at 4450. Once the stock crosses the indicated barrier, it may continue to rise toward levels between 4550 and 4600. The RSI indicator is at a level of 51, which provides support for the stock to climb higher. At current levels the stock is trading above 20 Day EMA, which shows positive signal and can move towards the target. With a medium-term target price of 4530, we advise purchasing BRITANNIA at the CMP of 4336. It can also be accumulated close to 4300 levels. If the price closes below 4225, our analysis will be regarded as being invalid.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)