Nifty50 could consolidate near 17,000 in short term: Gaurav Ratnaparkhi

What a week for Indian markets! Benchmark indices are up over 2% and over 8% for the month of July. What led to the price action?

Indeed, it was a wonderful week and month for the Indian equity market. The Nifty50 had tested the zone of 15,200 in the month of June and thereon it had a pretty sharp reversal in July.

On the monthly chart, this has resulted in an engulfing bull candle. The weekly chart shows that the recovery has been steep in the last two weeks where the Nifty has crossed some crucial short-term hurdles.

After a stellar July, what are your expectations from August? What does the chart pattern, F&O data suggest about the price action in the August series?

The F&O data as well as the technical chart show a strong start for the August series. However, if we look at the short-term structure, it looks like we are in an overbought zone.

Also, in terms of the OI data, 17,000 is a fighting level where there is a significant amount of call and put writing for the August series.

Thus, the index can witness a brief consolidation near 17,000 in the short term.

From a positional trading perspective, 17,500-17,600 will be the key area to watch out for whereas the support zone is placed near 16,750-16,800.

In terms of sectors, BSE Metal index rallied over 7 per cent in July. Do you see a similar performance in August? Will the rally continue and any top sectoral bets?

The metal index had seen a sharp decline during April-June period. So, it was due for a short-term pullback.

However, if we look at the overall structure, the medium-term trend is still bearish. With this bounce, the index is approaching its key weekly moving averages where it can stumble again.

For the metals, the recommendation will be to use the short-term bounce as an opportunity to exit.

For the monthly of July Star Health rallied more than 40 per cent while and fell by 18-20 per cent. What should investors do?

All these stocks have less data points to analyse them from a technical perspective. However, we can observe from the price action that both PB Fintech and Zomato are on a downward trajectory and can witness lower levels going ahead.

It is better to stay away from these stocks. Star Health witnessed a base formation near Rs 470-500 and rallied sharply in July.

The stock needs to hold above Rs 650 in order to keep the medium-term structure positive. One can stay invested as long as the stock trades above Rs 650.

Which sectors will participate in the next leg of the rally as we chart our journey above 17,000 on the Nifty?

Our sectoral analysis suggests that IT will be the major driver going ahead. The IT space has seen a larger accumulation over the last couple of months and is prepared for a multi-month rally.

In terms of the risk-reward also, this sector is offering attractive setups for traders as well as investors.

Small- and midcaps marginally outperformed. What led to the price action and should one now consider going overweight in broader market stocks as most negatives are factored in?

On the contrary, any further upside in the short term in the broader market especially in the small cap space needs to be used as an opportunity to reduce exposure over there.

The medium to the long-term structure is yet to confirm the resumption of the larger uptrend in the market.