A breach of 18750 on Nifty50 would extend this rally towards 19000: Mehul Kothari

In an interview with ETMarkets, Kothari said: “For the coming week 18350 would be an important support and a breach of the same might halt this euphoria” Edited excerpts:
Sensex and Nifty50 closed in the red for the week ending 9 December. What led to the price action – is it profit-taking or global cues?

Finally, we have witnessed a brief pause in the domestic markets as the benchmark indices underwent some profit bookings during the week.

The Nifty50 spot slowly dipped towards the 18,400 mark and managed to end the week with a cut of around 1%. Although the index had a limited fall the correction in some stocks was considerable.

At the same time, broader markets outperformed due to stock-specific buying in selective Midcaps. The correction might be because of profit booking since this was already dew.

Many technical indicators and data were pointing towards the same and hence it was already expected.

What is your take on the market for the coming week? Important levels to watch out for Nifty and Nifty Bank?

Here we want to discuss the FII’s long to the short ratio in the index future. We were of the opinion that once this ratio goes near 75% markets have corrected in the past.

Like it happened in Jan 2022 and April 2022. A similar kind of price action could be witnessed in the coming weeks. Currently, this ratio has come down to 60% from 75% and NIFTY has corrected from almost 18900 to 18400 mark.

Technically, there is a trend line breakdown in the Nifty50 but we are yet to breach the previous week’s low. Thus, for the coming week 18350 would be an important support and a breach of the same might halt this euphoria.

On the upside, a breach of 18750 would extend this rally towards 19000. We advise traders to remain stock specific until we have a better risk-reward to trade in an index.

With regards to the NiftyBank index, it has managed to outperform the benchmark indices by posting some gains during the week.

On the upside, the sky’s the limit for the NiftyBank index as we are already trading at life time high but the risk to reward is not favourable.

In addition, we are witnessing a negative divergence in daily RSI. Hence, on the downside, a break below 42,950 which is the weekly low might bring a pause to the upside momentum.

In such a scenario, the index might correct towards 42,000 or more. Any short trades in the index can be considered only below 42,950.

Any particular strategy that traders can deploy for the week?

Better to avoid long bets in the index and concentrate on individual stocks. There are many stocks that are outperforming the markets at this point in time.

In addition, one can start accumulating monthly put options for Dec 2022 or Jan 2023 in order to protect their portfolio in case of any heavy profit booking in the markets.

In terms of sectors, Capital Goods emerged as winners while IT took a hit – what led to the price action?

Cut in revenue guidance by major IT companies in the short term made investors uncomfortable over near-term growth prospects in the IT space leading to declining in the sector.


PSU banks led the rally in the week gone by. Punjab & was up over 40% in a week followed by Central which rose over 30%. What should investors do – buy, sell or hold?

The zone of 4500 – 4700 is a supply zone for the NIFTY PSU BANK index. The index has approached this zone and thus we expect some breather in the rally.

Traders or investors should avoid fresh buying in them for the time being. In fact, they can book their long positions.

However, investors can continue to hold them if they are willing to see a consolidation of a few months. This view to be negated on a monthly close above 4700.

Any 3-4 trading ideas for the next 1 month?

Here are top trading ideas –

Pharma: Buy near Rs 405| Target: Rs 460| Stop Loss Rs 370

Jubilant Pharma has confirmed a range breakout above the 404 mark. The price action was accompanied by a rise in volumes which indicates a genuine breakout.

The stock has also managed to sustain above its 200-Day moving average which suggests a change of trend. Thus, we advise traders to go long in the stock in the range of 405 – 400 with a stop loss of 365.

Garden Reach Shipbuilders (): Buy near Rs 535| Target Rs 590| Stop Loss Rs 515

Similar to other shipping-related stocks, even GRSE has been upbeat and is trading near its lifetime high.

We witnessed a fresh breakout in the stock above 535 and the pattern resembles a bullish symmetrical triangle. The price action is supported by decent volumes.

Thus, we advise traders to buy the stock near 535 with a strict stop of 515.

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