Anand James says though the Nifty looks to have climbed the wall of worry, with a 100- point burst above 17,170, only a little over 51% of the NSE500 stocks have cleared their peaks of Sept 23. This shows there is either a lag that could soon be covered or volatile days are not yet over, he says.
Sunil Shankar Matkar
October 05, 2022 / 12:04 PM IST
Though the IT index has seen a double bottom, and, hence, a relief rally could be expected, Anand James of Geojit Financial Services is not convinced that IT stocks will lead the next Nifty rally.
Geojit’s Chief Market Strategist, with more than 15 years of experience in capital markets, thinks the Nifty looks to have climbed the wall of worry, with a 100-point burst above 17,170 on Tuesday. This level had seen so many rejection trades since September 23.
A 17,350-17,500 target is still possible for Nifty, he says.
Q: Do you think Nifty Pharma is getting ready to move towards a record high after consolidating for around a year?
A: Pharma has been among the first off the block to rise from the September lows. We would be a buyer, but prefer to look for dips, as there are signs of exhaustion in the near term.
Q: Technically, do you think the Nifty has enough strength to reclaim its record high in the coming weeks?
A: On the face of it, Nifty looks to have climbed the wall of worry, with a 100- point burst above 17,170, which had seen so many rejection trades since September 23. However, only a little over 51 percent of the NSE500 stocks look to have cleared their respective peaks of September 23.
This is either a lag that could soon be covered or an early sign that volatile days are not yet over.
And yet, a 17,350-17,500 target is still possible for Nifty, before the other half of the NSE500 stocks takes a side. On a new peak, we would take the first step by eliminating the plunge view that has been prevailing so far, towards which end, we would like to see a close beyond 17,300 first.
Q: Also, what is the F&O data telling you about the trend in Nifty and Nifty Bank ?
A: Given the threat of time decay, especially with the expiry eve being a trading holiday, and with VIX slipping from the 21 to the 19 levels, traders opted to write PEs on Tuesday on the October 6 weekly expiry and OTM CEs were bought heavily on the October 13 weekly expiry for both Nifty as well as Bank Nifty. The max pain for the Nifty is at 17,200 for now, and we would be entering the second week of October, very long-heavy.
Q: Are the charts telling you that the rupee can hit a low of 85 against the US dollar in the coming months?
A: We had gone into October, expecting a prolonged and steep uptrend, with a burst above 83.3 first. However, post the test of 82, the USD-INR pair looks to have slipped into a congestion zone after hitting 82. This has moderated our upside view for USD-INR, and prompted to weigh the chances of a drop, should 80.9 give away.
Q: Are you getting enough indications that the IT space is bottomed out now and is getting ready for an upmove?
A: We have been playing reversals in IT for a while now, and, yes, the IT index has seen a double bottom. A relief rally is indeed in play, but we are not convinced that IT will lead Nifty's next rally, and expect the gains to be modest.
Q: The realty sector hit the most in the recent correction. Do you expect underperformance to continue?
A: Realty, which was poised for a significant downside, now looks to be finding buying interest that may curtail the underperformance. Several of the realty sector index stocks have seen reversal patterns.
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