By Vishal Wagh
Whenever domestic share markets head for a sizeable correction, it is usually triggered by a few groups or companies that come up with bad news. In 2000, it was the information technology (IT) companies. In 2007, it was started with Reliance Petrochemicals and Reliance Natural Resources in December; the market topped out in early 2008. In 2015, it was the Amtek group. In 2018-2019, it was DHFL, IL&FS, and Indiabulls housing. This time it seems it is Adani group; however, many things are not clear as Adani is a very strong group compared to all prior cases.
We may see multiple other companies, which rallied three to five times in the last six months, come under scanner now. If not then the market will continue to move northward. The market is currently dealing with multiple news flows whether it is the Adani group company saga or FED meeting outcome, or monsoon expectations and last but not least new variant of covid-19.
Nifty has given a channel breakout at 15,050 levels and the expected upside target of 15,850-15,950 has been achieved. During the week, Nifty created an evening star kind of pattern with reasonable follow-up selling. Amid the panic, Nifty almost reached the previous all-time high of 15,431. This data indicates that the short-term top is in place.
Normally, the price tends to check the last breakout which is at 15,050 levels. The strategy to play is to sell on the rise with a stop above 15,950 levels.
Bank Nifty outlook
As far as Bank Nifty is concerned, markets have witnessed a very strong underperformance from the Banking sector. However, PSU banks have shown good strength and a healthy correction, it is an area to look out for. Private banking space surely remained a disappointment and many banks like Bandhan Bank, RBL, AU Small Finance Bank, HDFC Bank and Kotak Bank failed to gain back the momentum seen earlier between February and April in this year.
Technically speaking, Bank Nifty corrected more than 20% in the last correction and failed to make a new high in the recent rally. At the same time, it has retraced around 74.60% and started losing ground again. Strong support for the Bank Nifty is around 32,000 levels. On the higher side 35,600-35,800 is the resistance zone.
Nifty Midcap and Nifty Small Caps
Both Nifty midcaps and Nifty small-cap indices are outperforming the major indices since April 2020 which indicates that the rally is broad-based and the value gaps between mid-caps or small-caps and large-cap have more or less been filled and the market is now ready for healthy correction on a broader base. Both indices show tiredness on the charts.
Even USDINR weekly chart is showing the strength if it sustains above 73.60 it will likely to retest 75-76 zone in a coming couple of weeks. There is a triangle breakout that has due checked in through the back. so, USDINR is ready for sharp appreciation of 2-3%.
Crude is ready for a big spurt above $ 70. Now resistance will be seen around 108 levels. This is again very negative news for India.
TATA STEEL: SELL
CMP: Rs 1,142 | Target Rs 1,060 |Stop loss Rs 1,186
Tata Steel had given a sharp fall in May from the levels of 1246 to 1072 levels. Then 20 EMA play the role of support and Tata steel retraced 50% of the total sell-off. At the level of 1180-1186, it has created a doji and indication of rejection candle for bulls above that. Sell-off has indicated that there will be further downside in stock and a low of 1072 will be tested. Theoretical targets for scrip is now 1012. 50 EMA is at 1046 and slop is upwards so it can become support.
ICICI BANK: SELL
CMP: Rs 640 |Target Rs 584 |Stop loss Rs 667
ICICI Bank made a high 679.40 in February and it has tested the lows of Rs 531.50 in May. Prices managed to retrace 88.20% and made a lower high Rs 665. In the last few session, it has sold off again and resumed a downtrend. The next probable target is Rs 584. 200 EMA is at Rs 548. Slop is Bullish so it will work as a major support on the downside.
(Vishal Wagh is the Research Head of Bonanza Portfolio. The views expressed are the author’s own. Please consult your financial advisor before investing.)