“Last time when a similar downside happened in Nifty IT in April 2000, we saw 44% fall since the break of Fibonacci golden ratio. Similar breakout favoring downsides are seen in heavyweights like Infosys, Wipro, HCL Tech, LTIMindtree and Tech Mahindra which are expected to trigger more downsides in the index,” said Anand James, Chief Market Strategist, Geojit Financial Services.
Edited excerpts from a chat:
Nifty ended the holiday-shortened week 0.7% lower. Where do you think the market is headed for the next 2-3 weeks before expectations around the Q4 earnings season start dominating headlines?
In the last 10 years, 80% of the time Nifty has seen around 3% upside in the 3 to 4 weeks prior to the start of Q4 earnings. The first 30 days since the start of the earnings season, net return in Nifty during the last 10 years has been around -0.18%. Around 80% of the time, the next 3 months have given around 8% return.
Last week harboured the hopes of 23,000-23,500, as meaningful gains post the MACD crossover is yet to materialize. We were also counting on bounce back usually seen from sub-25 RSI levels, where we were on 4th March. Incidentally, this move has mirrored the last instance of such bounce back which occurred in early August 2019, in terms of both the quantum of bounce as well as the duration.
Further, the rejection trade from the 20-day SMA early last week, resembles how Nifty turned lower from the 50-day SMA in early Feb. This ideally prepares the ground for a down move aiming at the 22,000-21,700 region. That said, the corrective waves, post the turn lower from last Monday, are appearing to form a W pattern in the hourly chart, hinting at a premature end to the corrections. Towards this end, we will look for a break of 22,319, the W’s bottom, or 22,587, the 20 day SMA for confirming a range breakout.
IndusInd Bank shares ended the week down 31%. Do you have chances of a relief rally as many fundamental analysts think that the market may have overreacted to the negative news around accounting discrepancy?
A morning star candlestick pattern as well as positive oscillator divergence encourages us to catch this falling knife. While we seek confirmation from a push above Rs 705, downside markers may be placed below Rs 649.
Nifty IT entered the bear market zone in the week amid fears of a slowdown, if not a recession, in the US. Would IT stocks be in your no-entry bucket?
Nifty IT has broken below the widening wedge pattern support in the daily scale and has broken below the monthly 61.8% Fibonacci retracement level of June 2024 low and Dec 2024 high hinting at more downsides. Also, the monthly MACD has broken below the signal line adding to the negative sentiment. Last time when a similar downside happened in Nifty IT in April 2000, we saw 44% fall since the break of Fibonacci golden ratio. Similar breakout favoring downsides are seen in heavyweights like Infosys, Wipro, HCL Tech, LTIMindtree and Tech Mahindra which are expected to trigger more downsides in the index.
Defence stocks are emerging as a winner as the EU looks to increase its defence spending.
After the fall since July 2024, most of the stocks have corrected more than 50% from the July highs and the heavyweights have started to build a base and look to be gearing up for reversal. The average 14-day RSI of the major defence stocks is around 45 which shows more room on the upside. Expect BEL, Mazgon Dock, HAL, BDL, Cochin Shipyard and Paras to ride this wave higher.
Give us your top ideas for the week.
RAIN (CMP: 132)
Target: 140-147
Stop Loss: 124
The fall since December 2024 seems to have been arrested around 116 from where a reversal is being attempted. An inverted H&S pattern in the daily scale looks to be maturing and nearing breakout. In the weekly scale, multiple reversal candles have been formed and weekly SMIO is about to cross the zero-line favoring our expected continuation of upside. We expect the stock to move towards 140-147 in the next few weeks. All longs may be protected with stoploss placed below 124
MAXHEALTH (CMP: 990)
Target: 1,050-1,080
Stop Loss: 965
The fall that we saw since December 2024 seems to have found support around the horizontal support zone of the 975-980 region. The weekly MACD histogram has shown signs of exhaustion at lower levels hinting at more legs to the reversal attempt. We expect stock to move towards 1,050-1,080 levels in the few weeks. All longs may be protected with stoploss placed below 965 levels.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
