As promised yesterday, my technical view of Indian equities is as follows. The readers need to note that I am just an armature student of stocks markets and not a professional technical or fundamental analyst. The following view is based on the combination of technical studies I often used for determining my entry and exit points. This analysis is also one of the parameter in review of my asset allocation strategy; though it does not carry any significant weight in this exercise.
General
Overall I believe that the up move that started from the panic bottom of 7610 (Nifty closing) recorded on 23 March 2020, could continue for few more weeks. In this up move, broader markets have materially outperformed the benchmark indices. In this up move The Nifty Small Cap 100 index has gained ~75%, while Nifty 50 (+52%) and Nifty Midcap 100 (+57%) have lagged. The market breadth has accordingly been significantly positive.
As the up move enters its last phase in next 2-4 weeks, the trend may reverse and the benchmark may perform better than the broader markets, before a meaningful correction sets in. I would therefore be materially reducing my allocation to mid and small cap funds and moving to large cap oriented funds.
Nifty 50
In my view, Nifty 50 may peak around 12600-12740 in next 19-27 weeks. From the present ~11550-11600 levels, Nifty faces a significant hurdle in 11890-11940 range. A successful cross over this hurdle shall see Nifty moving to ~12700 level rather quickly.
The move up to ~11900 may be broad based, but the onward journey shall be led by few heavyweights only.
After peaking, Nifty may correct 50% of its gains from the low of 7610 and trade in 9950-10150 range in the following 13-17 weeks.
A close below 10795 anytime in next 6 weeks will negate this view; in which case I will reassess my position. However, if asked specifically, I would rate the probability of my present view holding correct as high (65%).
Nifty Bank
Nifty Bank position however is not as clear to me as is the case with Nifty 50. The implied momentum in this index is very high hence the projections are changing very fast.
Nonetheless, let me share my current view on Nifty Bank.
In my view, Nifty Bank may peak earlier than Nifty 50. It may peak in the range of 25750-28800, in 13-17 weeks.
A close below 20730 anytime in next 6 weeks will negate this view; in which case I will reassess my position. Anyways, I am hugely underweight on banks and NBFCs and shall continue to remain so till 16400 on Nifty Bank or 43 weeks, whichever is later.
I have shared my view, since many readers had specifically asked for it. If someone finds it materially off the mark, I have absolutely no objection. I would not like to entertain questions or arguments about this.
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