LEAD TECHNICAL ANALYST, YES SECURITIES
Is the Worst Over for Now?
Whenever weakness or bearish bias swings too far in one direction, market always tends to revert to the mean. Similarly, index’s prolonged correction from 12k mark seems to have found some respite around the low of December 2016 (i.e. 7,894), as it turned out to be an important (colossal) bottom earlier. So far, the same bottom has not been breached on closing basis since December 2016. Thursday’s low of 7,835 is also marked around the midpoint of current three-digit Gann channel i.e. 785(0), which led to a sharp intra-day recovery. The index followed it up with Friday’s sharp surge.
How Much can the Market Rebound or Fall?
The Nifty marked a higher low (as it managed to sustain above the recent bottom of 7,835) and staged a recovery thereafter, culminating in a ~6% up-move in Friday’s session, soothing frayed nerves of market participants to some extent. Barring Friday’s trade, the index had struggled to sustain any intra-day recoveries. However, importance of confluences of support around 7,850 and presence of bullish candle around bottom of Gann number of 813(0) infers immediate floor near 841(0) and index could attempt 9,000 mark in the near term.
What could Investors Do?
The Nifty Pharma Index has shown relative strength recently. On P&F (1*3%) ratio chart of Nifty Pharma/ Nifty, it has formed an anchor column at the bottom. It is moving with the support of its 45 degree trendline and broken above its 10-column moving average. We expect select Pharma stocks to outperform after this chaotic period. Positive traction is likely to continue in Ipca Labs and Lupin (7-8% upside) in the medium term.