Pullback action likely in IT sector next week: Rajesh Palviya

“Market momentum is likely to continue further in the next week also and it is possible that Nifty can move further higher towards 16,450-16,500. In this recovery, the most important thing is both the indices have now managed to cross above 20-day moving average. So, that shows that some strength is coming back on the near term setup also,” says Rajesh Palviya, Vice President – Research, Axis Securities. Edited excerpts:


The market was very exciting in the week gone by but what is up next? What are the levels that you are watching for Nifty, as well as, Bank Nifty?
After a lot many dull days, the market has shown a very strong recovery. In the second half of the May series expiry, the market has bounced back from lower levels and now in today’s trade, there is follow up buying action on the first day of this June series. So, in this June series, we have started with an almost three-month lower average of rollover data for Nifty. For the market, the rollover is quite in line with the three-month average. But if we look at the overall setup, Nifty has added almost 26 lakh shares for this series on the rollover day which shows that there was an addition in the Nifty position. But looking at the oversold territory for most of the sectors, the Nifty has witnessed a smart recovery and now we are trading above the 16,200 level.

The data setup on the derivative side shows that this momentum is likely to continue further in the next week also and it is possible that the Nifty can move further higher towards 16,450-16,500. But in this recovery, the most important thing is both the indices have now managed to cross above the 20-day moving average. So, that shows that some strength is coming back on the near term setup also. Nifty, as well as, Bank Nifty are now in the positive territory for the near term setup. We believe that this upmove is likely to continue further in the coming week also.

What do you make of the strength that we are seeing in the Bank Nifty space? How much credibility will you give to this move and going forward what is the level to really watch out for when it comes to Bank Nifty?
Bank Nifty has outperformed clearly and most of the private banks have contributed to this rally. Given the kind of setup Bank Nifty is showing, we believe that this rally can extend up to 36,500 because in this recovery we are able to cross the hurdle of 35,200 on the weekly closing basis. It clearly shows that this short covering action in the Bank Nifty is likely to continue further so we are projecting a target of 36,500 on the Bank Nifty. One can keep a stop loss of 362,00 to remain long in the Bank Nifty also.

For the next week, which are the sectors that you are tracking?
Looking at the current data setup, we are bullish on automobiles, banking, and FMCG, and we can see some bullish bets in the pharma space also. Most of the sectors like IT and metals are in the oversold zone. So there is high hope that some pullback action we can witness in the IT space. But on the metals space, we are still in wait and watch mode. We are waiting for some more recovery trade to continue then only we will be focussing on metal space from a trading point of view. But we are very much bullish on FMCG, automobile, banking, as well as, pharma space at the current juncture.

Do you track commodities closely because we have seen quite a bit of bounce back when it comes to the crude prices they are now close to that 118/dollar per barrel mark, any levels to track as far as crude goes?
Crude oil again is a challenge for our market. If crude oil continues to trade above 112/dollar then possibly there is an upside target of $118 to $120 on a short term basis. At the current level crude can spoil this upward momentum of the market.

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