Nifty 50: Nifty 50 may consolidate near 17,000 in short term: Gaurav Ratnaparkhi

In an interview with ETMarkets, Gaurav Ratnaparkhi, Head – Technical Research, by Sharekhan, said: “17,500-17,600 would be the key areas from a positional trading point of view, while the support zone is placed near 16,750-16,800”. Edited excerpt:

What a week for Indian markets! The benchmark indices are up over 2% and over 8% for the month of July. What caused the price action?

In fact, it was a great week and month for the Indian equity market. The Nifty 50 tested the 15,200 zone in the month of June and then saw a sharp reversal in July.

On the monthly chart, this has resulted in an attractive bull candle. The weekly chart shows that the recovery has been bullish in the last two weeks where Nifty has overcome some important short term hurdles.

After a wonderful July, what are your expectations from August? What does the chart pattern, F&O data suggest about the price action in the August series?

The technical charts along with the F&O data show a strong start for the August series. However, if we look at the short term structure, it looks like we are in overbought zone.

Also, in terms of OI data, 17,000 is a fighting level where there is significant amount of Call and Put writing for the August series.

Thus, the index could see a brief consolidation near 17,000 in the near term.

From a positional trading perspective, 17,500-17,600 would be the key area to watch while the support area is placed near 16,750-16,800.

Sectorally, the BSE Metal index rose over 7 per cent in July. Do you see similar performance in August? Will the rally continue and any top regional bets?

During the April-June period, there was a sharp decline in the metal index. So, it was due for a short term pullback.

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However, if we look at the overall structure, the medium term trend is still bearish. With this bounce, the index is approaching its key weekly moving average where it may stumble again.

For metals, it would be recommended to use the short term bounce as an exit opportunity.

For the month of July, Star Health gained over 40 per cent and declined 18-20 per cent. What should investors do?

All these stocks have fewer data points to analyze from a technical standpoint. However, we can see from the price action that both PB Fintech and Zomato are on a downside and could see lower levels going further.

It is better to stay away from these stocks. Star Health saw a base formation around Rs 470-500 and gained momentum in July.

The stock needs to remain above Rs 650 for the medium term structure to remain positive. As long as the stock trades above Rs 650, the investment can be made.

As we are trading above 17,000 on Nifty, which areas will participate in the next leg of the rally?

Our regional analysis shows that IT will be the key driver going forward. The IT sector has grown tremendously in the last few months and is poised for several months of boom.

Even in terms of risk-reward, this sector is offering attractive setups for traders as well as investors.

Smalls and midcaps outperformed marginally. What caused the price action and should broad market stocks now consider being overweight as most of the negative factors are?

Conversely, any further upside in the short term in the broader market, especially in the small-cap space, needs to be used as an opportunity to hedge risks there.

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The medium to long term structure is yet to confirm the resumption of a major uptrend in the market.

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