The Nifty50 index closed at 23,907.25, reflecting a renewed upward momentum, while the Sensex surged to 79,117, signaling a robust rebound.
The rally was particularly fueled by buying interest in heavyweights across IT, banking, and auto sectors, which helped the indices reclaim crucial levels.
Analyst Sahaj Agrawal, Senior Vice President: Head of Derivatives Research, Kotak Securities interacted with ET Markets regarding the outlook on Nifty and Bank Nifty along with an index strategy for the upcoming week. Following are the edited excerpts from his chat:
Nifty has managed to reclaim its 200 DEMA in Friday’s session. What is the short-term outlook on the index?
Nifty broke a momentum support level placed at 23,950, since then the bias for Nifty50 has been negative. No reversal attempt has matured yet. Any bounce back from here should be treated as a pullback for now.
Do you see any critical support in Nifty that might provide a bounce back?
Honestly, in a positive market setup, we would consider the 23,000-23,500 zone as a strong accumulation zone. But this time around due to muted earnings and liquidity uncertainty we maintain a cautious stance from the trading perspective. From the long term perspective, I believe this is a good phase for looking at stocks.
Given the options data, do you see an up-move in the Nifty before the next series begins?
Given the current event lineup and the volatility seen on account of events, I would go by the short-term parameters. Currently, the setup remains negative with sell on rise expected to continue.
Given the general downtrend, do you recommend any strategy for Nifty?
In the current setup where momentum is not strongly positive and we are not seeing any strong reversal setup maturing yet – I would recommend taking it by the day. Follow up buying is missing to push the markets towards sustained reversal and only if we see that happening at a broader level will the confidence increase.
What is your say on the FII selling? It is reducing, but FIIs still stand as the net sellers. Where do you think a lack of confidence is coming from?
So let’s take some examples. The last time FII sold aggressively was in H1CY22 – US bond yields rose before the selling.
Q2FY2020 – bond yields were volatile and there was a pandemic.
This time around we are seeing volatility in the US bond yields and earnings slow down – I think till we don’t see some uptick in earnings or a clearer stance on the liquidity situation globally – FIIs could continue with a negative stance.
Compared to Nifty, Bank Nifty seems better placed. It was able to take support on the crucial 200 DEMA as well as its support zone. Do you think an upmove is possible? Or do you see a consolidation or maybe even a downtrend?
Banking happens to be the last sector to come under selling pressure. I continue to expect banking to outperform. Most of the private banks are holding on to support levels and are resilient on the downside. As an objective trade, the risk-reward proposition looks extremely attractive for many stocks.
Considering that Bank Nifty is slightly better, any stocks from the index?
Axis Bank and HDFC Bank are very strong and offer fundamental upside as well in our opinion
With dragging indices, do you see any sectors for the traders to hide?
I think the high beta sectors are now more skewed towards risk – my tilt would be towards the defensives and strong value propositions.
Let’s talk about Indian Hotels, it has given promising commentary on the company’s strategy. It is one of the strength-displaying stocks, even trading at its all-time high. Any positions?
In such markets, you will always have outliers and not necessarily all traders would have positions in the same. For those who have trailed your SL levels to 745 while the trend support for the stock is only seen at 590 – buy on dips around 650 if you get it around the same.
Have you spotted any other stocks that are displaying strength in a weak market? If yes, any strategies or recommendations?
Private Banking and IT seem to be better for now .
The market is now done with the Q2 earnings. What is the general market outlook for Q3?
Q2 was a mixed bag with some misses and some hits. Broadly the earnings have been muted with a significant dent of the quarterly growth.
Any sectors that tend to outperform in the quarter?
Looking at the setups IT and Banking look attractive. In most of the other sectors the risk-reward seems a little skewed.
What is the market outlook for the next series, given the combination of global events and domestic factors affecting Indian stocks?
My medium-term outlook continues to remain cautious. Expect global volatility to go up significantly while we could do better since we are currently underperforming. Broadly looking at a structural resistance at 25,500 below which maintains a cautious stance. Bulls will be back with momentum and thrust once we cross the mentioned barrier.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)