It is recommended to stay light until we see a clear trend emerging because the short-term and medium-term charts are not in sync in such situations, which usually results in turbulent trading sessions, he says.
Q: What is your assessment of the August series and your expectations for the September series?
Profit-booking was observed in August, with the bears dominating the market. Following the stunning run in recent months, the majority of short-term technical indicators had previously indicated that the markets would experience a period of momentum loss and exhaustion. As a result, it did not come as a surprise to investors looking for ways to profit from the upswing.
In August, all benchmark indices experienced widespread selling and closed in the red. There were many encouraging domestic data points, including a 7.8% Q1 economic growth rate and a robust manufacturing PMI. On the international front, however, worries about China’s real estate market and conflicting signals from the USA seem to predict consolidation at the current levels.
The Nifty is currently projected to trade between the 19,200–19,600 range. In the upcoming weeks, investors should brace themselves for higher volatility and plan accordingly.
Q: While Nifty ended the week with gains and Bank Nifty with declines, what lies ahead for them this week?
Unlike Bank Nifty, Nifty benefits from sectoral diversification, which enables it to withstand the effects of any one industry. Heavyweights in the Nifty non-financial sector like Reliance, TCS, and Infosys occasionally play a critical role in halting the drop of the Nifty. However, considering the recent rapid surge in the markets, one might anticipate market consolidation and a range-play in the near future.
A critical area of support and resistance for the Nifty is located around the 19,200 and 19,600 zones, respectively. On the other hand, the areas of support and resistance for the Bank Nifty are 43,600 and 45,000, respectively. It is recommended to stay light until we see a clear trend emerging because the short-term and medium-term charts are not in sync in such situations, which usually results in turbulent trading sessions. But the recent highs reached by the markets in July will continue to serve as short-term peaks.
Q: What should be the strategy next week in the wider market as we see it giving more money-making opportunities to investors?
As of August end, the overall advance-decline ratio for stocks was 0.99, down from 1.03 in July. One evidence that the general trend is still positive is this one. Also reflected in another important technical signal is the fact that 79% of equities are currently trading above their 200-day moving Average. All of this is effectively reflected in the performance of the Midcap and SmallCap indices as well. It is also important to note that the rally has been broadly based, spanning multiple industries, which reflects greater investor confidence in the markets.
However, it’s important to keep in mind that midcap and smallcap prices decline faster than largecap, and history confirms this. Since sitting on paper profits is never a wise investing decision, investors in both midcap and smallcap stocks should consider realising gains as well, unless they have a holding period of at least five years.
Q: India Vix is down 4% WoW so how should investors and traders approach the next week?
Despite the recent market drop, the India VIX has been trading in a stable range, around the 11 level, which amply demonstrates investors’ overall confidence in the markets. Investors are also less anxious than they are when the markets are in a wild fall when they tend to correct and then rebound.
There is not much cause for concern as long as the India VIX does not trade consistently over the 14 level. Given the recent rapid run in markets, investors will need to take a cautious approach to investing in the present market environment. The reward-to-risk ratio should always be at the core of any investment strategy.
Q: Realty, metals, and auto were the top performers this week. How do you see their prospects for the week ahead, and are there any stocks you have on your radar?
With Mahindra Lifespace, Prestige, Phoenix Mills, DLF, and Indiabulls Real Estate all rising above 5%, the Nifty Realty Index increased by 5.76% WoW, demonstrating investor interest in the sector. Hindalco, Hindustan Copper, Jindal Stainless, Jindal Steel, National Aluminium Company, NMDC, SAIL, and Tata Steel all had gains of more than 5% WoW on the metals front, demonstrating the robustness of the rally in the metals sector.
The announcement of Chinese stimulus measures for the real estate market was the main driver of this sector’s sudden upswing. Among auto stocks, M&M, Maruti Suzuki, and TVS Motors were the top gainers, with the increase being mostly confined to a small number of stocks. As a result of the significant gains made over the previous couple of weeks, we could see profit booking in several of these equities.
Q: Among the top performers were DCM Shriram, BHEL, and MTAR Technologies, while BrightCom and Five Star Business were the top losers in the Nifty 500 pack. What should investors do?
Investors should look at booking profits in DCM Shriram, BHEL & MTAR, which gained 14.81%, 29.36% & 20.45%, respectively WoW as the gains have been significant. At the same time, investors should stay away from stocks such as BrightCom which was down 22.54% WoW & Five Star Business, which fell 2.06%.
BrightCom has been in the news for various wrong reasons, so investors should always stay away from such stocks. Five Star Business has crucial support around the 680-700 zone, which could provide some respite to the stock after correcting from almost 880 levels. Exiting this stock on any bounce-back opportunity could be looked at by investors, invested in Five Star Business stock.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
