Strong support for Nifty placed at 16,000; ITC remains top buy for March series: Ruchit Jain of 5paisa

Ruchit Jain, Lead Research, 5paisa said that India VIX is still high around 28 which needs to cool off below 24 again for some stability.

In an interview with Zeebiz's Kshitij Anand, Jain said that for the coming week, supports for Nifty are placed around 16000 and 15700 while 16500 and 16800 are resistances. Edited Excerpts –

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Q) Benchmark indices shed more than 2% in the week gone by. What led to the price action on D-Street?

A) We witnessed some roller coaster rides during the week with the index giving moves on both sides in a wide range.  

The stronger hands (FII’s) have continued their selling streak in the equities and in the derivatives segment too they formed bearish positions.

The negative news flows from the global geopolitical developments had a major impact on our markets and hence, we witnessed such corrections during the week.

Q) How should investors prepare themselves for the coming week. What are the key levels that one should track for the coming week on Nifty and NiftyBank?

A) The undertone remains bearish as the previous support of 16,800 has now acted as a resistance. The ‘Lower Top Lower Bottom’ structure continues on the daily time frame charts and the momentum oscillators to are pointing out weak momentum.

The India VIX is still high around 28 which needs to cool off below 24 again for some stability.

For the coming week, supports for Nifty are placed around 16000 and 15700 while 16500 and 16800 are resistances.

The supports for Bank Nifty are placed around 34000 and 33580 while resistances are seen around 35000 and 35500.

Q) Sectorally, auto, banks plunged the most. What led to the price action and do you think the pressure could continue in the coming week as well?

A) The banking space was corrected due to the formation of short positions in the derivatives segment. Bank Nifty as well the index heavyweights saw a fall in prices along with a rise in the open interest which led to such sharp correction.

Till the market momentum remains negative, this space is likely to continue its underperformance. However, given that prices have already seen a decent correction from the highs, the risk-reward is not much favorable for fresh shorts and hence traders should be very selective in trades.

The Auto space reacted primarily to the weak sales numbers that we announced at the start of the month. Also, rising commodity and crude prices have a negative impact as it increases cost and reduces demand for their products. Hence, we saw selling pressure in this sector which could continue in the near term.

Q) India VIX above 29. What does it suggest? Should investors brace for more volatility? What does the history suggest?

A) When India rises above 22-24 zone it has always been signs of higher volatility and uncertainty for equity markets. VIX is still at a higher level which does not augur well for the market. It needs to cool off below 24 for some stability.

Q) What should investors do with small & midcap stocks? Time to buy or time to exit high beta, high PE stocks? What are your views?

A) Market participants are always attracted towards the mid-cap and small-cap space during uptrends but when markets correct, these spaces tend to provide deeper price-wise correction, and hence, investors then stay out due to fear.

Given that volatility is high, we may see further correction in the near term. The major support for the Nifty Midcap100 index is placed in the range of 25500-26000 and when the index comes in that range, one should start taking contra trades for their portfolio.

Q) Any top 3-5 stocks that traders can look at for the March series?

A) Here are a few trading ideas for the March series:

Bajaj Finance: Sell| Target Rs 6300| Stop Loss Rs 6725

We expect some further correction in the financial space and Bajaj Finance within this sector looks weak as the stock has breached its 200 DMA.

One can look to short Bajaj Finance in the range of 6570-6590 with a stop loss above 6725 for a probable target of 6300.

ITC: Buy| Target Rs 250| Stop Loss Rs 210

On the positive side, ITC has bucked this falling trend and has witnessed buying interest during the week.

The price up move is supported by good volumes and hence, one looks to buy the stock in the range of 225-220 with a stop loss below 210 for a probable target of Rs. 250.

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