By Ajit Mishra
Markets have been trading with the corrective bias for the last three weeks, after making a new record high. Feeble global cues are largely dictating the trend and almost all the sectors, barring healthcare, are facing the heat. Besides, severe pressure on the broader front has further added to the negativity as both the indices, midcap and smallcap, have almost engulfed the gains of the last three months.
Global cues are largely dictating the trend, in absence of any major event or data on the domestic front and we expect this scenario to continue. Besides, the upcoming expiry of the December month derivatives contract would keep the participants busy. Though the decline is widespread, we feel the defensive viz. FMCG and pharma may offer some respite in between however one needs to be selective.
We have highlighted critical levels that one should keep in mind while attempting any fresh positions in Nifty and the banking index. While the majority of sectors are trading in sync with the benchmark, we’re still seeing certain themes showing resilience thus we are sharing a list of stocks that are looking promising for rebound along with the weak structures. Amid the volatile market environment, traders should remain cautious and prefer hedged bets instead of outright.
Nifty Outlook
Nifty has lost nearly 6% from the top and currently hovering around the support zone of medium-term MA i.e. 100 EMA on the daily chart. It may see some respite after the recent slide however 18,200-18,500 would act as a strong hurdle. On the downside, the support zone of long-term moving average i.e. 200 EMA around the 17,400 zone would be critical to hold. We suggest continuing with stock-specific trading approach and maintaining shorts too until Nifty decisively reclaims 18,500 or forms some a reversal pattern.
Bank Nifty
The banking index also retraced noticeably from its record high of 44,151.80 levels and tested the support zone of the previous swing high around 41,600 levels. However, it has rebounded swiftly of late and tested the immediate resistance around short term MA i.e. 20 EMA around 42,900 levels. In line with the overall trend, we expect choppiness to continue. Participants should maintain a selective approach and prefer private banking counters over the PSU pack.
Stocks to Watch
Among the list of F&O stocks, stocks like Bharat Forge, Bharti Airtel, Godrej Consumer, SBI Life are likely to hold a positive tone and witness less volatility. On the other hand, Bajaj Auto, Dr. Reddy’s, Tata Power, Tech Mahindra, and Zee Ltd are trading subdued and may continue to reel under pressure.
(Ajit Mishra, VP- Technical Research, Religare Broking. Views are author’s own.)