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Third day in a row of decline and today it is about 200 points lower, which is what we are looking at the benchmark. Where do you see support levels for the Nifty?
Rahul Sharma: Clearly, this is another breakdown in the making and it looks like Nifty will soon break the low of 24,700 that we touched on October 7. Well, the meaningful support is near 24,500, 25,400. So another 300 to 400 points can be deducted from the current level. And we believe that there is still some time before the capitulation will take place. So right now, since October was heavily dominated by the bears, we think we could see another round of volatility coming in the next two weeks and 24,400 is where we see the Nifty at the moment. Now you can simply buy the 24,500 monthly expiration put options currently trading at 108, 110. This can act as a hedge against your long positions or even if you want to short the market. It seems like a good idea to go by the monthly put options on the Nifty, where we think these put options could double or even triple from current levels.
And what do the car index and car shares look like? Obviously there’s a fundamental reason behind this decline, but how are the index and stocks ranking on the charts?
Rahul Sharma: Yes, absolutely, so the auto index has outperformed, but ultimately there is a collapse; in fact, this led the correction. We broke the October 7 low in the auto index and now I think the index is heading towards the 24,500 mark, which is another 2% on the low side.
So from an index perspective, there is certainly a collapse and there could be further negative consequences in the short to short term. In terms of stocks, Tata Motors is something that has been under pressure, as if it has not specifically participated in the stock markets. for the past month or so and now below 900, the stock is actually showing signs of capitulation. So perhaps others apart from Tata Motors can follow suit. So Maruti is something we are keeping an eye on. This is very close to the 200-day exponential moving average. Breaking that below 12,000 could also bring more weakness to this stock.
What exactly is your opinion about the real estate index? What does this reveal now, as it has overtaken the auto index as the sector’s biggest loser on an intraday basis, with the property basket down 3.5%, but the sector as a whole has also not been doing well lately?
Rahul Sharma: Yeah, so real estate has done relatively well compared to autos in recent days. It is only today’s session that we see a significant dent in the index coming and today was the kind of day where there has been no attempt at recovery even by the broader markets.
And besides, the Nifty has fallen below 24,800, real estate will also be involved in this. So from an index perspective, I think around a thousand we can expect the index to slide down.
But having said that, the macro structure of real estate stocks is relatively better and we believe that these stocks will recover relatively faster once the market stabilizes, once the Nifty stabilizes. On a relative scale, we would therefore rate real estate much higher than any other sector index.