Market may remain in a sell-on-rally mode till Nifty stays below 17,850: Rupak De

“On the higher end, resistance is visible at 17,850. The market may remain in a sell-on-rally till the time the Nifty stays below 17,850,” says Rupak De, Senior Technical Analyst at LKP Securities.

In an interview with ETMarkets, Rupak said: “The mid-term charts of several Adani stocks have become weak; however, the long-term price trend remains intact, and buying can be done on significant dips,” Edited excerpts:

Nifty50 slipped below crucial support levels and that too ahead of the Budget 2023. What led to the price action?
Nifty50 has fallen more than 2.5% during the week on the back of a sell-off, mainly due to a negative report by Hindenburg on Adani Group.

The recent selloff had led Nifty to trade below the 50-Days EMA on the daily timeframe, which attracted further selling in the market. Support is visible at 17,400 on the downside, below which the Nifty may fall to 16,950-17,000. On the higher end, resistance is visible at 17,850.

Even though global cues were mostly positive, why is there a sudden panic selloff? FIIs have pulled out more than Rs 20,000 cr from the cash segment so far in January 2023. What is leading to a large selloff?
The index has fallen below the recent consolidation on the daily chart, leading to a big selloff from foreign institutions. Besides, the index has fallen below the 50-Days EMA on the daily timeframe, which confirms the short-term bearishness.

However, the 50-week exponential moving average, located at 17,400, is likely to provide immediate support. A further correction may be seen if the index falls below 17,400.

How should traders play the market in the Budget week? Which are the important levels one should track?
After two days of back-to-back big red candles, the market participants may prefer waiting before the big day. Therefore, a range-bound movement before the budget looks very much possible.

On the higher end, resistance is visible at 17,850, whereas 17,400 may act as crucial support for the falling index value.

Therefore, investors need to be very watchful of the 17,400 level, below which severe corrections may take place in the market.

Based on the Jan F&O expiry – what is your view on markets for February series?
Following a decisive fall from the recent consolidation, the technical setup is expected to remain weak over the short term. Support is visible at 17,400, below which further sharp correction appears possible.

On the higher end, resistance is visible at 17,850. Therefore, the market may remain in a sell-on-rally till the time Nifty stays below 17,850.

What is your view on Adani group stocks which were down in double digits in the week gone by? How should one play the Adani theme – buy the dip, sell the panic or hold for a long-term view?
The Hindenburg vs. Adani news led to a crash in the Adani Group stock price. The prices of the Adani Group stocks have fallen below several major supports.

The mid-term charts of several Adani stocks have become weak, however, the long-term price trend remains intact, and buying can be done on significant dips.

Sectorally, Oil & Gas, PSU Bank saw over 5% cut. What led to the price action?
The oil and gas space witnessed a severe correction as the particular index had formed a double top on the daily timeframe. Besides, the index showed a consolidation breakdown, resulting in a sharp correction.

Meanwhile, the PSU banking space witnessed a sharp fall led by SBI on the back of the Hindenburg vs. Adani news, leading to a fall below the previous swing low. Over the short term, both the indices look weak and may continue correcting lower.

Apart from Adani Group stocks – Dixon Tech fell more than 20%. What should investors do?
The stock fell sharply on Friday, down about 20% from its previous closing. On the monthly chart, the stock has corrected below its previous swing low, which indicates a surge in bearishness.

Immediate support is seen around 2,600, which is a 61.80% Fibonacci retracement of the previous rally on the monthly chart; expect a smart recovery if the stock holds above 2,600.

On the other hand, failure to sustain above 2,600 may trigger a correction towards 2,070.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)