1) Nifty has ended in the red zone for the third consecutive week. How strong are the chances of the index falling below 22,000 in the next 2-3 weeks?
A solid recovery from sub 22800 levels last Monday masked the selling that unfolded through the rest of the week on every attempt to rise. We had gone in last week with the feeling that a large break down was imminent, but this was dodged through the week, despite multiple forays into the 22800 vicinity. We feel that this has only served to delay the inevitable. However, given the flattish range last week, the downside break may not extend all the way to 22000. We feel that an upswing attempt could unfold, once in the 22550-22300 region.
2) Given the fact that the market has been on a negative trend for the last five months, do you think sell on rise is the best strategy for traders as buy the dip hasn’t been clearly working?
We have seen green shoots here and there, but there has been little evidence to suggest that this broad based, or that a sustainable upswing is in the making. Unless such signs are visible, we feel that there is still room for more time and price correction, before strength is visible.
3) Smallcap and microcap indices have been the worst hit. Do you see more pain ahead in the broader market?
While they have been the worst hit, the micro cap constituents have been the highlight of the recovery attempts this month so far. From among the micro caps that have declined more than 20% so far from September peak, 7.2% have recovered about 50% of their declines, and from among the micro caps that have declined about 10% from the top, about 15% have recovered 25% of their declines. This is just a sign of stock specific buying happening and there is no evidence of a broad based bounce back or a risk on approach among the low cap stocks. Atleast not yet, but the signals could add up in the coming week.
4) Godrej Industries shares have seen a sustained rally. What are the charts indicating at?
Given the fact that we have come close to the December peak, even while broad market has continued to see declines, the current uptrend has come certainly against the run of the play. Though it is tempting to see this as a sign of strength, the rewards are not positioned favourably for an entry now.
5) After the sharp drop seen in M&M on Friday amid threats from a possible Tesla entry into the Indian market, do you think there is a case for buying the fear?
The low 2700s have staved off multiple downside attempts since mid 2024. Given the momentum of the downtrend, we may see a penetration of the same. However, oscillators have gone soft after a one month long downtrend, and are signalling a potential turn around. We feel that one or two days of downtrend could see encourage traders to be risk on and pick the up stock. We feel that the upswing will set off without disturbing 2580, which is where the stop loss may be kept.
6) Give us your top ideas for the week.
RALLIS (218)
View – Buy
Target – 238
Stoploss – 210
The stock has been on a decline since October 2024 and seems to have taken support around the rising trendline support of 203 forming a Hammer candle in the weekly scale hinting at possible attempt to pull back. Oscillators have begun to show positive divergences, hinting at potential reversal. We expect the stock to move towards 238 in the next few weeks. Protect all longs with stoploss placed below 210 levels.
First published in Economic Times