Divergence spotted! History suggests that Sensex & Gold moved in line since 2005: Mehul Kothari of AnandRathi
One interesting observation we want to share in this edition is that the Sensex vs. Gold (INR) performance. We gathered the data since 2005 and we witnessed that GOLD and SENSEX has been moving in line with each other, Mehul Kothari, AVP – Technical Research at AnandRathi – said in an interview with Zeebiz’s Kshitij Anand
One interesting observation we want to share in this edition is that the Sensex vs. Gold (INR) performance. We gathered the data since 2005 and we witnessed that GOLD and SENSEX has been moving in line with each other, Mehul Kothari, AVP – Technical Research at AnandRathi – said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts:
Q) A volatile week for Indian markets as Nifty50 fell more than 1%. What led to the price action on D-Street?
A) Well, it seems to be a breather for the bulls on the D-Street wherein we have witnessed profit booking from higher levels. Global sentiment played a major role in such kind of price action during the week.
Most of the developed and emerging markets underwent softness during the week gone by.
With regards to the NIFTY spot, the index has corrected from the top of 17,543 but managed to end above 17,500 mark for the week ended October 1.
The volatility index too surpassed above 19 but has cooled off a bit to close near the 17-mark.
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Q) Nifty rose more than 5% in the September series. What does the data suggest for the October series? Which are the important levels to watch out for on Nifty and NiftyBank?
A) The derivative data indicates that the rollover for the Oct series stood at around 75% which was lesser than its previous rollover of 83%.
In addition, there was a dip in open interest (OI) too which indicates that the longs that were formed in September 2021 are now out of the system.
The other derivative data shows no hints of any kind of major breakthrough since the PCR or the Put-Call Ratio has been oscillating between 1.5 and 0.9 while the FIIs have a mixed position in the index futures.
Now, technically the index is facing a hurdle at a psychological mark of 18000. This might continue to act as a very strong hurdle even in the month of October 2021.
Only a breach of the same on the upside would reaffirm the bullish bias that could extend the rally towards 18200 – 18400.
At this juncture, the index is struggling near its previous swing low of 17326. A daily close below this level might confirm a temporary pause in the uptrend and we could witness some selling pressure in the market. This could drag the index towards the 17000 mark and that could be decisive support on the technical front.
With regards to NIFTY BANK index, it slightly outperformed the benchmark indices and surged above 38000. However, it failed to build momentum and close the month near the 37500 mark.
The support for the index is shifted to 36,000 and a breach of the same might reinforce the bears to dominate the banking index.
On the upside, only a sustainable move above 38,000 would propel the index towards the 40,000 mark.
Q) Has the market texture changed from buy on dips to sell on rallies?
A) One interesting observation we want to share in this edition is that the Sensex vs. Gold (INR) performance. We gathered the data since 2005 and we witnessed that GOLD and SENSEX has been moving in line with each other.
Whenever there has been a huge divergence between them, they tend to catch up with each other. Even at this juncture, there is a divergence of around 25% in them.
This indicates that either Gold will catch up with Sensex at 60K or both might try to meet in between. In such a scenario, SENSEX could slow down from here on or even correct a bit.
Thus, one needs to remain extremely cautious and stock-specific from here on. The major long-and-medium-term trend remains a buy on dips but that does not rule out a healthy correction at any given point in time.
Traders will now have to be extra careful while building any short-term directional positions. It would be tough time.
Q) In terms of sectors – Utilities, power and realty stocks witnessed buying interest. Do you think the momentum will continue in these sectors in October as well, or should investors book profits?
A) We have been upbeat about our view on the REALTY pack and that has played out well. With regards to Power and Utilities, we expect some kind of consolidation after such run up.
However, all the mentioned sectors including Realty have turned positive on a larger scale and that is why any major dips in them would be a buying opportunity, but the dips could be really deep.
On the other hand, after the rally seen in the Realty pack, we are of the opinion that even the housing finance pack might attract some buying traction in the coming weeks. That space should be on the trader’s radar.
Q) What are your views on FII action in the September series and how do you see the action moving in October?
A) The derivative stats of FIIs shows that at the beginning of the month they had net 47,649 contracts longs in index futures and by the expiry, it was reduced to 22,434 contracts.
This indicates that there is a drop in long plus the positions are not so heavy. On the cash front, they continue to remain buyers to the tune of over 8000 crores worth of equities.
Similar to Sept 2021, even the month of Oct 2021 would witness lacklustre activity due to ongoing uncertainties.
Q) Any 3-5 beaten-down stocks that could be a buy-on dip candidate for the next 3-4 weeks?
A) Here is a list of trading ideas for the next 3-4 weeks:
Manappuram Finance: Buy on dips| LTP: Rs 179| Stop Loss: Rs 168| Target: Rs 195| Upside 9%
The weekly chart of the stock MANAPURAM confirmed a major range breakout during the month of July 2021 above 190 mark. After the breakout, the stock surged towards 220 and is now back below the breakout zone.
The theoretical target for the breakout comes near 280 mark and that indicates that there is much more upside left for the stock in the coming months.
At this juncture, the stock has turned from the ICHIMOKU cloud support on a weekly scale. Even on the daily scale, it has turned from the placement of 200 DEMA and 200 DSMA.
Thus, traders are advised to buy the stock in the range of 179 - 175 with a stop loss of 168 on a closing basis for the upside potential target of 195 in the coming 3 – 4 weeks.
M&M: Buy on dips| LTP: Rs 827| Stop Loss: Rs 790| Target: Rs 880| Upside 6%
The stock M&M has been sideways for many months with a larger degree of a positive trend. The daily chart construes that the stock has confirmed a breakout from the consolidation of around 5 months.
The price action is supported with the positive placement of daily and weekly momentum oscillator RSI.
The stock has also managed to come out of Ichimoku cloud resistance on a weekly scale. The theoretical target for the displayed breakout comes around 940.
Traders are advised to accumulate the stock in the range of 825 - 815 with a stop loss of 790 on a closing basis for the upside potential target of 880 in the coming 3 – 4 weeks.
SVP Global Ventures: Buy| LTP: Rs 121| Stop Loss: Rs 117| Target: Rs 140| Upside 15%
Recently, the stock SVPGLOB corrected from the top of 165 and is currently hovering around the 125 mark. The zone of 125 – 120 has been a strong demand are for the stock since it is listed.
On the daily scale, we are witnessing a reversal candlestick pattern which indicates the possibility of a bounce.
Traders are advised to buy the stock above 125 with a stop loss of 117 for an upside target of 140 in the coming 2 – 3 weeks.
Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.
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