Some consolidation likely but if Nifty reclaims 16,800 in the coming week then 17,000 is possible: Gaurav Dua

In an interview with ETMarkets, Dua said: “Nifty overshoots 16,800 then it can stretch towards 17,000. On the flip side, a breach of 16,600 can trigger a short-term dip towards 16,360. The level of 16,600 can be considered as a SAR (Stop And Reverse) level for the long position” Edited excerpts:

Q) What a week for markets – Sensex reclaimed 56,000 while the Nifty50 also had a touch-and-go moment with 16,700. What led to the price action?
A) The Nifty50 has seen a strong traction in the week gone by. The 20-DMA acted as a springboard near 15,900 from where the index has taken the current leap.

The hourly chart shows that the Nifty had taken support near the lower end of a rising channel in the last week and thereon it has moved up towards the upper end.

For the last three sessions, the index is hovering near this upper channel line, which is inching higher as it is an upward sloping line. So, the benchmark index is now trading close to its short-term target of 16,800.

Q) How do you see markets in the coming F&O expiry week – do you think that the US Fed meeting could lead to some volatility on D-St. What should be the strategy? And important levels which one should track?

A) India VIX has cooled off in the last few weeks; however, it has now reached near the lower end of the short-term range.

On the downside, it has tested the weekly lower Bollinger Band from where it has bounced back in the previous instances.

Volatility is likely to shoot up going ahead. Also, the Nifty has moved up in the past six consecutive sessions and is now a stone’s throw away from its short-term target of 16,800.

This suggests that a brief consolidation cannot be ruled out. At this level, the risk-to-reward ratio is not in favour of initiating a fresh long position; whereas the positional traders who have been riding the trend can trail their stop loss to 16,600 & hold on to the long position.

In case, the Nifty overshoots 16,800 then it can stretch towards 17,000. On the flip side, a breach of 16,600 can trigger a short-term dip towards 16,360. The level of 16,600 can be considered as a SAR (Stop And Reverse) level for the long position

Q) In terms of sectors – metals, IT rose more than 5% in a week. What led to the price action? Will the momentum continue in the coming week as well?
A) Metals & IT sectors witnessed good traction in the week gone by. In the case of metals, however, this is a short-term bounce. The medium-term structure is still bearish. In addition, there can be a high level of volatility in this sector.

It is better to avoid aggressive long positions in this space & use the bounce as an opportunity to exit. On the other hand, in the case of the IT Index, the angle of descent has decreased over the last few weeks.

The index has been in a process of forming a base for itself in the last few weeks. The daily & the weekly momentum indicators have developed positive divergences.

Thus, structurally, the IT sector is in the process of revival. So, we expect positive momentum in the IT space in the coming weeks

Q) and will be declaring results post market hours on Friday. What should investors do if they have a 6-12 months time horizon?
A) RIL & Infosys both are buy-on dips candidates. And, any short-term weakness in these stocks from current level can be used to accumulate them in a staggered manner from an investment perspective with a time horizon of 6-12 months.

We expect sustained upside in both these stocks over the medium to long term.

Q) Where do you see Rupee and Gold hovering in the coming week?

A) Rupee CMP 79.87 (spot)- Mounting global recession concerns and hawkish Federal Reserve with inflation control as its clear priority over the growth issue in at least the near term may help the US Dollar negate the impacts of the first contraction in the flash US composite and services PMIs in 26 months.

Thus, unless the US Fed wavers in its priorities at its upcoming July 26-27 FOMC meeting, the INR is expected to trade between 79.50 and 81 with a weakening bias.

Gold:

Gold CMP $1723 (spot), gold has been on the defensive despite most of the economic data out of the US falling short of expectations and rising global growth concerns as the US Federal Reserve’s determination to rein in rampant inflation has outweighed other factors.

Most of the other key central bankers are following the same script to different degrees. The Fed may overlook the first contractions in the US composite and services PMIs in 26 months to deliver its monetary policy decision at its July 26-27 FOMC meeting with a hawkish tilt.

Gold may trade between $1675 and $1750 with a weakening bias unless the Fed’s monetary policy betrays growth concerns.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)