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Piramal company | Future of Nalco May: Traders may be short on Piramal Enterprise and Future of Nalco May: Gaurav Ratnaparkhi, Sharekhan

Nifty has formed a “Death Cross” formation over the past week, and several technical parameters suggest the index should remain under pressure next week, according to Gaurav Ratnaparkhi – Head of Technical Research at Sharekhan by BNP Paribas.

In an interview with ETMarkets, Ratnaparkhi said that for the Nifty, 17400-17500 is a crucial resistance zone. Unless this barrier is removed on the upside, the Nifty is likely to retest last week’s low at 16824; below which 16600 will be the next target. Edited excerpts:

A volatile week for Indian markets, but the bears remained in check despite seeing a pullback for a few sessions. What led to the price action?
The Nifty formed a Doji pattern on the weekly chart for the first week of April. The pattern formed near the weekly upper Bollinger Band as well as near a falling trend line taken from the October high.

Thereupon, the index entered a short-term correction mode and broke above short-term support levels on the downside.

On the way down, the index has created a gap area on the daily chart and with the recent minor bounce, it has attempted to close this gap area over the past week.

However, the index faced another round of selling near the upper end of the gap zone which pushed the index up again towards the end of the week.

We are about to enter the F&O expiration week. We’ve seen Death cross both indices over the past week. Are there any specific levels investors should watch out for for Nifty and NiftyBank?
As you rightly mentioned, Nifty has been doing “Death Cross” training over the past week. Several technical parameters suggest that the index should remain under pressure next week.

For the Nifty, 17400-17500 is a crucial resistance area. Unless this barrier is removed on the upside, the Nifty is likely to retest last week’s low at 16824; below which 16600 will be the next target.

Nifty Bank underperformed Nifty last week, and it should be one of the main downside forces.

Looking ahead, Nifty Bank is likely to break last week’s low at 35926 and may drop towards the daily lower Bollinger Band, which is near 35000. On the other hand, 36800-37000 will act as a short-term ceiling .

On a sector basis, energy stocks, oil and gas stocks rose while selling pressure showed up in computer and banking stocks. What led to the price action?
The energy space has been seeing strong traction for the past few weeks. The same is true for the Nifty Energy Index as it rallies with the expansion of the daily and weekly upper Bollinger Bands.

We expect this sector to remain on an upward trajectory. The IT sector, on the other hand, has seen a sharp decline over the past 2-3 weeks.

Selling pressure intensified as the index broke through its short-term moving averages in the penultimate week. This sharp drop pushed the daily momentum indicators into the oversold zone, which is now poised for recovery.

So, a rebound in the IT space is on the cards. The banking space, on the other hand, is expected to continue with the correction phase

The US Fed has announced an aggressive rate hike of 50 basis points in the near future. Do you think it’s priced in or that we might see further adjustments in global investors’ portfolios that could weigh on markets? FIIs withdrew more than Rs 26,000 cr from the spot segment of Indian stock markets.
The likelihood of an aggressive rate hike had increased following the release of consumer inflation data last month. However, the Fed Chairman’s overall stance also appeared quite hawkish with an inflation moderation target of 2%.

This pissed off the markets. But the markets tend to quickly absorb these developments. Given the difficult macroeconomic conditions, foreign investors have drawn money out of emerging markets in general and India in particular due to India’s outperformance over the past year.

FII exits could continue in the immediate term. But domestic inflows are strong and foreign selling pressure is easing at lower levels.

Where is the smart money going? Have you noticed a change in the trading pattern – conservative or aggressive?
In terms of sector rotation, the automotive and infrastructure sectors will be on the radar going forward. After a brief pause over the penultimate week, these sectors are kicking off a new leg of the rally.

The short-term and medium-term structure of these two sectors shows inherent strength. We therefore expect this space to outperform over the next two months.

That said, the larger end of the market is where the main problem lies. The broader market, particularly the small cap space, is expected to see much more pain relative to large caps over the coming months.

Thus, market participants should be very careful about their exposure to small caps.

Your 3-5 trading ideas for the next 3-4 weeks?
Here is a list of trading ideas –

Maruti Suzuki India: Buy| LTP Rs 7903 | Stop Loss Rs 7600 | Target Rs 8300-8510 | Up 7%

The stock came out of a short-term consolidation. He came out of a side channel and started the next stage.

The daily momentum indicator has triggered a bullish crossover and started a new upward cycle from the balance line

Piramale Companies: Sell MAY FUT | LTP 2179.10 | Stop Loss Rs 2280 | Target 2080-2000| 4-8% drop

The stock recently stumbled near its crucial weekly moving averages where it formed an inside bar pattern on the daily and weekly charts and entered a correction mode.

Going down, it broke its daily moving averages as well as the swing low. The daily momentum indicator is in line with the decline

Domestic Aluminum: Sell MAY FUT | LTP Rs 115.90 | Stop Loss 121 | Target 110-104| Disadvantage 9%

The stock has formed a Double Top pattern, which is a bearish pattern and has entered a corrective phase.

It has fallen below its short-term supports and is expected to fall with the daily lower Bollinger Band. The daily and weekly momentum indicators are in bearish mode.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts belong to them. These do not represent the views of Economic Times)