Market participants should be a little cautious in the remaining weeks of the October series as markets could turn choppy and volatile; however, 18,000 on the downside will be the key pivot support level, Aditya Agarwala, Senior Technical Analyst, YES SECURITIES – said in an interview with Zeebiz’s Kshitij Anand. Edited excerpts:  

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Q) A historical week for Indian markets as both Sensex, Nifty50 touched fresh highs. What led to the price action?

A) Indian markets have been on a roll again this month outperforming its peers as Nifty-50 Index ended the truncated week with gains of 2.5 per cent, adding 4 per cent for the month so far.

Further, excellent quarterly numbers from Midcap IT companies and strong auto sales drove the markets higher.

Moreover, heading into the festive season expectations of a strong recovery in demand and re-emergence of pre-pandemic buying pattern as Covid-19 restrictions ease will keep Indian markets buoyant.

PSU Banks also participated in the rally this week taking the markets higher to a new all-time high.  

Q) We are midway through October and the festive season has begun. What is your view on markets for the coming week, up till Diwali?

A) Indian benchmark Indices have started the October month on a strong note and midway through the month Nifty-50 Index has already piled on 4% to its tally.

Heading into Diwali muhurat trading, Nifty is already sitting at an overbought territory and the coming week is going to be crucial in deciding the trend for our markets as companies start declaring their results.

The level of 18,450-18,500 on the Nifty50 is an immediate resistance zone on the upside for the next week. Failure to breakout from this hurdle may trigger profit booking dragging the markets lower to levels of 18,150-18,050.

Therefore, market participants should be a little cautious in the remaining weeks of the October series as markets could turn choppy and volatile; however, 18,000 on the downside will be the key pivot support level.

Q) Sectorally PSU Banks led the rally from front, followed by metal and auto stocks. What led to the price action, and what should be strategy of investors in the coming week as well?

A) Nifty PSU Bank Index has finally managed to breakout from the Triangle consolidation pattern resuming the upward journey. In the coming week, PSU Banks could continue to lead the rally from the front as several stocks in this space still look attractive on charts.

Therefore, traders can continue to hold long positions in the PSU Banks and add on minor corrections as well.

The nifty Metal index is also trading at fresh highs as demand for metals remains strong and after a brief consolidation phase, the Index has resumed its uptrend which is likely to continue in the coming week as well.  

Nifty Auto continued to rise for 4th week in a row led by strong momentum in Tata Motors and M&M shares. It is now approaching the previous all-time high of 12,100 formed in October, 2017.

A breakout beyond this previous peak would extend the uptrend in the coming weeks as well. However, traders should be a little cautious as some of the auto stocks are sitting at extreme overbought levels following the recent rally.

Q) NiftyBank also hit a fresh high on Thursday. Where do you see the index headed by Diwali?
 
A) The Nifty Bank has broken out of an Ascending Triangle pattern neckline into a new all-time territory triggering a resumption of the uptrend.

Further, the immediate target on the Nifty Bank stands at 40,000 and a successful close beyond this resistance which also happens to be the trendline resistance will extend the uptrend to levels of 42,200.

Key support on the downside is at 38,500-38,000. Top bets in this space are SBI, Kotak Mahindra Bank, IndusInd Bank, and HDFC Bank.

Q) Small & midcap indices also surged to fresh highs – what should be the trading strategy?

A) Broader markets continue to make higher highs and higher lows confirming bullishness; however, following this sustained up move, both the Indices i.e. the Midcap and Smallcap Index are currently sitting at an extreme overbought territory on multiple time frame charts.

Moreover, the RSI indicator has started to form negative divergence i.e. price making higher high while RSI making lower high which indicates that the uptrend is losing momentum.

Therefore, trader should remain cautious in this space and partial profit booking is strongly recommended as bouts of sudden profit booking cannot be ruled out.  
 
Q) Top 3-5 trading ideas for the next 3-4 weeks?

A) Here is a list of top trading ideas for the next 3-4 weeks:

Kotak Mahindra Bank: Buy| LTP: Rs 2016| Target: Rs 2150| Stop Loss: Rs 1940| Upside 6%

The stock is on the verge of a break out from an Ascending Triangle pattern consolidation suggesting bullishness building up. Technical indicator RSI has turned upwards beyond 60 after forming a positive reversal suggesting strength in the stock.

Shriram Transport Finance: Buy| LTP: Rs 1383| Target: Rs 1460| Stop Loss: Rs 1340| Upside 5%

The stock has broken out a sideways consolidation on good volumes triggering the resumption of the uptrend. Further, RSI has also turned upwards after a double bottom formation suggesting strength.

Adani Enterprises: Buy| LTP: Rs 1646| Target: Rs 1800| Stop Loss: Rs 1560| Upside 9%

The stock has broken out of a Pennant pattern consolidation phase on healthy volumes confirming bullishness. Further, RSI has also turned upwards after taking support at the 60-level confirming a strong uptrend.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)