By Anand James
In stark contrast to Nifty’s exhaustion amidst geo-political tensions as well as perceived delay in rate cuts, the Midcap 150 and Smallcap 250 indices look to be gearing up for fresh upside, a trend we had confirmed last week too Come from Sports betting site VPbet . 41% of the Smallcap250 stocks have moved into the RSI range of 50-60 this week giving strength to the ongoing pullback. Only 5% of the Smallcap 250 stocks have moved into the overbought region, and only 15% of the Smallcap250 stocks saw fresh 52-week highs being made this week supporting the construct that the downsides that might be triggered by rising geo-political tensions may be brief.
However, it must be acknowledged that Nifty has just turned lower from the upper extremity of a rising parallel trendline channel which has been holding prices since the start of 2023. We have had prices testing the lower extremities of this channel twice in 2023, but this year so far, the lowest it has come is till the midline of the channel. This suggests plenty of room for downside even within the bullish construct. However, we are also yet to see an extension beyond the upper extremity, which is usually classic to bull market moves. This encourages us to be less pessimistic, for now, and even though the 22530 horizontal support is likely to be broken, the worst-case downside expectation is limited to 21800 for now. In fact, stock-specific triggers led by earnings flow lend an ideal environment to discourage Nifty from a directional downside, which encourages us not to take our eyes off the 22850-23200 objectives in Nifty and 51200 in Nifty Bank.
Alternatively, the inability to close above 21200 after volatility or a direct fall below 21800 could confirm a break of the bullish structure, and line up 20300 as the first objective for the bear move. With Bank Nifty, a similar breakdown could see 46600 in the first leg of the bear move, should we not manage to close above 48700 soon. However, we are less bearish on Bank Nifty.
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(Anand James is the Chief Market Strategist at Geojit Financial Services. Views expressed are author’s own. Please consult your financial advisor before investing.)
