Nifty likely to retest September peak of 18,000 in coming week: Anand James

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“Traders are more comfortable than earlier in seeing prices moving higher, and that not only sets up a retest of September peak of 18090 next week,” says Anand James, Chief Market Strategist at Geojit Financial Services.

In an interview with ETMarkets, James, said: “The US Fed dot plot is already showing a 48% for a 50bps hike as opposed to a 43% probability for a 75bps hike. This is partly the reason for the buoyancy in the US as well as Indian stocks.” Edited excerpts:

What a week for Indian markets. Nifty reclaimed 17700 levels while Sensex also managed to hit 59K. What led to the price action?

At one point, the week looked destined for a muted close, with most sectors, including banks, the leaders so far, witnessing selling.

But, while mid and small-cap indices ended up with 0.5% and 1% losses respectively, the Nifty found strong buying interest in the second half of Friday.

This was led by Reliance Industries which rose 3%, and also the auto stocks across the board, with Maruti rising almost 5%.

Based on October series data where do you see markets headed in November?

Long build-up was seen in banking, telecom, and realty. While energy, media, metal and capital goods witnessed short covering.

The significant short buildup was seen only in the FMCG sector. High rollover was seen in realty, cement, auto, financial Services, cement, and telecom stocks compared to the previous series.

The auto sector has moved into the improving quadrant after a long time. We expect positivity to continue.

Meanwhile, Nifty’s OTM CEs especially upto the 18500 strikes are seeing more activity than similarly positioned OTM PEs, suggesting that the traders have set their eyes far ahead.

More importantly, VIX’s fall from the lofty 22.89 levels to 16 levels has not only been steep but also been persistent through the last fortnight. This hints that traders are more comfortable than earlier in seeing prices moving higher.

And that not only sets up a retest of the September peak of 18090 next week, but also allows for challenging the year’s peak of 18350 in November.

Any events which traders should watch out for that could dent the bull run?

While November’s Fed meeting will draw no surprises as it is widely expected to see a 75bps hike, there is now an emerging consensus towards seeing lower rate hikes starting December.

The US Fed dot plot is already showing a 48% for a 50bps hike as opposed to a 43% probability for a 75bps hike. This is partly the reason for the buoyancy in the US as well as Indian stocks.

This notion will be put to test in the next fortnight, as US jobs data as well as US CPI numbers flow in, alongside US midterm elections. RBI’s twin meets will be viewed with these in the backdrop.

Any strategy that can be deployed based on the F&O data?

Since we are in a declining IV environment, and with key event risks scheduled beyond the weekly expiry, short strangles are preferred.

Short Straddle at 18000 for the 10Nov expiry which is fetching a little over 400 points as of Friday’s close, is also preferred with a 3 to 4-day holding period.

Tata Motors DVR in BSE 500 index rose by over 20%. Will the momentum sustain? What should investors do in November? Delhivery fell more than 20% in a week – what should be the strategy here?

With last week stellar gains, Tata Motors DVR is now at the upper extremity of the trading range that has held since February this year. This is a challenge that usually calls for consolidation.

While we are confident of a push higher, it may be prudent to wait for dips to say, 229, for those attempting fresh longs.

On Delhivery

The stock has seen relentless selling which has taken it to key Fibonacci supports as well as the lower range of the Bollinger band.

This allows for a pullback, which however could see renewed selling from the 400-430 band before resuming downtrend.

Metals, PSU, and banks led the rally. What led to the price action?

Metal as well as Financial sectors had seen significant selling by both FPIs as well as MFs.

This had given a good launchpad for prices to rise, partly on a softer outlook for rate hikes, as well as improved by expectation of seeing banks showing improvement in the balance sheet as well as credit growth.

Any 2-3 trading ideas for the November series?

Here are a few recommendations for the next 3-4 weeks:

TCI (last close 749.75) is poised for a 100-point run higher, eying its record peak. A morning star pattern along with Bollinger support gives an ideal template for a reversal from the present downtrend. A stop loss may be placed below the recent low of 685.

Home First (last close 730.6) has had a weak run so far, but an inside bar on Friday hints at reversal.

We may place this for a short run up aiming at 760 initially, with a stop loss placed below Friday’s low of 707.9.

First published in The Economic Times

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