RAJESH PALVIYA
HEAD-TECHNICALS AND DERIVATIVES, AXIS SECURITIES
Where is the Nifty headed?
Chart pattern suggests that if Nifty crosses and sustains above 16,500 it would witness buying which would lead it towards 16,700-16,800. However, if the index breaks below 16,300 it would witness selling which may take the index towards 16,200-16,000. Nifty continues to remain in an uptrend in the medium term, so buying-on-dips continues to be our preferred strategy.
How much more downside do you see in mid- and small-cap indices?
BSE mid- and small-cap indices have slipped below their 50-day moving average which indicates we may see more selling pressure and if BSE MidCaps breaks below 22,550 then it may slide further towards 22,300-22,100. BSE SmallCap index is trading near its support area of 25,700 and if it breaks below 25,700 then we can see another 2-3 per cent correction towards 25,100-25,000 levels in short term. We may witness some more profit booking and one should wait for some more corrective action to initiate buy in the mid- and small-cap space at lower levels.
What should investors do?
For monthly expiry on August 26, we are suggesting a bullish strategy called ‘call ladder’, which involves buying one lot of Nifty 16,400 Call at Rs 121 and selling of one lot of 16,550 Call at Rs 52 and one lot of 16,700 Call at Rs 17. The maximum profit of Rs 4,900 will be attained at 16,550 levels. The strategy will start making losses above 16,798. The cost of the strategy involves outflow of Rs 2,600 which is the maximum loss if Nifty trades and remains below 16,400 levels at expiry. However, above 16,798 it’s advisable to exit the strategy in total to avoid unlimited losses. Breakeven points of the strategy are 16,798 on upside and 16,452 on the lower side.
SIDDARTH BHAMRE
DIRECTOR-ALTERNATIVE INVESTMENTS AND RESEARCH, INCRED EQUITIES
Where is the Nifty headed?
Despite Friday’s correction, Nifty charts have not shown any signs of worry and the uptrend still seems to be intact. Nifty has a very important support around 16,150. However, Bank Nifty is an issue for the markets. It was attempting to go past its resistance of 36,200-36,300 for two weeks but within two sessions it is knocking the door of its support around 34,800. Foreign institutional investors have squared off significant amounts of long positions in Nifty futures but are yet to form aggressive short positions. It seems this uptrend may take a pause again.
How much more downside do you see in mid-and small-cap indices?
Nifty Midcap 100 and Smallcap 100 index have given the lowest closing since the start of July as they closed 4.5 per cent and 7.7 per cent lower from their recent tops, respectively. Though charts are not looking very weak, but there is nothing positive and no reversal is seen. One should wait for an upmove to begin in this space as preempting an upmove may turn costly.
What should investors do?
Investors with a short- to medium-term horizon can reduce long exposure. This doesn’t mean going short. IT and FMCG, the defensives, are doing well. That is also an indication to be less aggressive in high beta space. Stay light. You may miss on some part of the upmove if its starts from here but global parameters like movement in crude oil and dollar index suggest that the probability of that is less.
DHARMESH SHAH
HEAD-TECHNICALS, ICICI SECURITIES
Where is the Nifty headed?
The formation of higher high-low on the weekly chart signifies that the broader structure remains intact. However, the 8 per cent rally of the past three weeks has hauled weekly stochastic in overbought territory. A couple of days of breather from here on should not be construed as negative, instead dips should be capitalised to accumulate quality stocks. We expect the Nifty to move in the broader range of 16,300-16,700 amid stock specific actions.
How much downside do you see in mid-and small-cap indices?
The Nifty mid-cap and smallcap indices are approaching maturity of their price and time wise correction. Since March 2020, they have not corrected for more than 10 per cent and arrested the corrective phase within 3 consecutive weeks. In the current scenario as well, we expect the broader market to maintain the same rhythm. A couple of weeks’ breather would offer incremental buying opportunity in quality mid-cap stocks.
What should investors do?
We do not expect Nifty to breach the strong support of 16,100. In large-caps, we are positive on TCS and Asian Paints; while in the mid-cap space we prefer Tata Elxsi, Chambal Fertilisers for a 5 per cent to 8 per cent upmove in coming weeks.
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