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“Relative performance of Bank Nifty has remained weak against Nifty in the recent past. The technical structure of the Bank Nifty is also weaker than Nifty, as Bank Nifty is placed below its 20 and 50-day EMAs (exponential moving averages), while Nifty is still above its 50-day EMA,” Vinay Rajani, CMT, senior technical and derivative analyst, HDFC Securities.
Bank Nifty has formed Bearish Head and Shoulder pattern on the daily chart. Hence, below 44,100, this bearish pattern would be confirmed and Bank Nifty could fall below 43,000 in that case, he feels.
With more than 16 years of experience in the financial markets, Vinay believes the Pharma index would continue to outperform. “Though this is the sixth consecutive month of rise in the pharma Index and it recently registered a new all-time high, the ratio chart of Pharma against the Nifty Index is still down from its 2015 peak,” he says.
Q: Do you expect the Nifty50 to break the 19,000 mark in coming sessions, considering it has given a close below the upward-sloping support trendline from March lows?
Nifty is currently placed 2.8 percent lower from its all-time high of 19,991, registered on July 20, 2023. At the start of August month, Nifty breached the crucial support of the 20-day SMA (simple moving average). This support has been violated for the first time since the rally started in March 2023. Apart from the trend line violation, indicators and oscillators like MACD (moving average convergence divergence) and RSI (relative strength index) have also turned bearish on short-term charts. However, on the weekly and monthly chart, positional trend of the Nifty seems very strong.
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So, definitely, there is a sign of weakness in the index for the short term and the index could extend its correction but we believe that the downside in the market would be limited. The first semblance of support is expected in the 19,050-19,100 zone. If this zone is broken, then the next support comes in the zone of 18,850-18,900, which we think would be a good buying opportunity in the index. Any level above 19,650 in the near term, would negate the short-term downtrend.
Q: Do you think Bank Nifty will take the lead if any correction takes place going ahead?
The relative performance of Bank Nifty has remained weak against Nifty in the recent past. The technical structure of the Bank Nifty is also weaker than Nifty, as Bank Nifty is placed below its 20 and 50-day EMAs (exponential moving averages), while Nifty is still above its 50-day EMA. BankNifty has formed Bearish Head and Shoulder patterns on the daily chart. Below 44,100, this bearish pattern would be confirmed and Bank Nifty could fall below 43000 in that case.
Q: Nifty IT has seen a nice run-up after a fall in July. Do you expect the index to retest its July high in the coming days and will it act as a defensive if there is a possible correction in the markets?
Indian IT Index is positively correlated with the Dollar Index. Dollar Index has seen smart pullback from the July Lows of 99.22 to current levels of 102.73. Rising dollar index has always resulted in to the rally of Indian IT stocks.
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Even after this pullback, the positional trend of the Dollar Index is bearish with lower tops and lower bottoms on the weekly chart and therefore we expect down trend in the DXY to resume any time soon. Considering that, we believe recent recovery in the IT stocks will be short lived and supply would emerge at higher levels. A level of 31,700 in NSE IT index is very strong resistance and until that is surpassed, we don’t expect IT index to outperform.
Q: Do you expect big profit booking in Nifty Pharma index as we have seen one-way kind of rally in the index since the monthly F&O expiry week of May?
No, we don’t expect sharp correction in the Pharma Index. we believe Pharma index would continue to outperform. One observation has been that, though this is the sixth consecutive month of rise in the pharma Index and it recently registered a new all-time high, ratio chart of Pharma against Nifty Index is still down from its 2015 peak.
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Going by the long term seasonality charts, Quarter 2 (July-September) has always been the best performing quarter for the pharma sector. So, we expect pharma index to outperform In the coming times at least till September 2023.
Q: Do you think the correction in Godrej Properties is over and can possibly rebound from here on?
No, we don’t expect a rebound from current levels. Realty Index has always been a high beta sector. Godrej Properties is one of the heavy-weighted realty stocks. From the bottom of Rs 1,005 (March 2023), the stock rallied more than 76 percent toward Rs 1,769 in the span of 4 months. After such a steep rise, the stock formed a Bearish Engulfing candlestick pattern on the week ending August 4, 2023. This pattern indicates a bearish trend reversal for the short term.
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The stock has corrected 14 percent from the recent peak and we expect this correction to extend further towards Rs 1,400. It has breached crucial support of its 50-day EMA, placed at Rs 1,549.
Q: Will Vedanta break its Rs 200 mark as the chart formation looks like a Rounding Top kind of pattern on the weekly charts?
Vedanta’s recent move does not qualify for rounding top formation. The rounding top is always inverted “U” shape pattern, where price fall remains gradual. From the March 2023 bottom, Vedanta’s stock price went up like a staircase but has gone down recently like an elevator.
Nevertheless, the recent move is bearish. The 100-week EMA and previous swing low levels are coinciding at Rs 228 levels. A decisive close below Rs 228 would be considered further bearish, which could drag the stock below Rs 200.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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MC Interview | Bearish trend may confirm if Bank Nifty decisively breaks 44,100, pharma outperformance to… – Moneycontrol
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