It was one of the most damaging weeks for investors. Nifty shed nearly 250 points on July 8, which was mainly due to weakness in the most stable and strong companies of the index.
Stocks like Bajaj Finance, Bajaj Finserv, HDFC Ltd and HDFC Bank closed lower after almost eight months of gains. It shows that the long-term stability of the market is under threat.
I firmly believe that the market is a game of anticipation and if you act post-reaction, then it would be a loss-making deal for sure.
Anticipation is the combination of theory and real experience of the last several years. The market is a game of odds and we should stick to disciplined money management.
In brief, traders must anticipate a likely trend in the market and then follow disciplined money management. In the previous week, we anticipated the market was headed for 11,400 and strategy was to reduce weak long positions at resistance.
For the current week, we are anticipating a down move to continue at a gradual pace. The previous lowest level, 11,460 would be ultimate support for the Nifty.
If the index slips below 11,460, then Nifty could well drop towards 11,400 or 11,300. However, falling to 11,300 on July 17 or falling below 11,460 after July 17 would be the end of the first leg of correction.
On the higher side, crossing 11,640 would extend pullback rally to 11,750/11,770 levels. Create sell positions between 11,750 and 11,770 keeping a final stop loss at 11,820 for the same.
At 11,300, we should be a contra buyer in the market, and look to buy strong and large-cap companies in the market.
As per the options data, the market is down but not oversold, which is the reason that short-covering trend is missing even though frequent pull back moves are occurring.
Sector-specific:
Technically, Bank Nifty is exhibiting weakness and decline to 30,100 or 30,000 is more likely on daily charts. Except for pharmaceuticals, other indices are indicating weakness and one should be cautious in adding long positions at higher levels.
The author is a senior VP (Technical Research), Kotak Securities.
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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