So, a lot of data points, these are just a couple of them which I have highlighted that have started to reach lows not seen since COVID, including the very simple RSI indicator that we watched that had come down to 21 yesterday and that is again the lowest reading since COVID.
So, how can there be so much panic and no relief and usually when you have an extreme in panic and you have exhausted selling on the downside and the reason I say exhausted is that volumes are also tapering off every day in this fall and therefore the selling pressure had really eased. The opposite of that is that when you start seeing buying again, there are very few sellers and therefore you will see sharp moves on the upside once the move starts which I think today, very-very high probability it has already done so. We can look for some initial cutoff points. The first one was 22,300, we have sort of crossed that. The next one is going to be closer to around 22,470, 22,480 or let us just put it at 22,500 because around there is where we had a congestion zone just a week back and then we gapped down because of the tariff related news. So, that gap area 22,500 is going to be the final cutoff. Once we really get past that, then there should probably be no looking back till 23,000. So, looks pretty good. Everything was in a good place to start buying from an investment standpoint. Traders may take it step by step as levels break and they get further confirmation, but from an investment standpoint, we have been making this point that it was time to invest and the low point is probably done.
But given the recent volatility, what is your view and what is your advice for the trading community because though we have reclaimed that 22,000 mark, made a base over there, inching up to those higher levels, but believe that given the uncertainty and the volatility there could be supply pressures at each level. So, how should one see and look out for trading opportunities in this sort of a market?Rohit Srivastava: So, I mentioned it earlier that it is possible that we are overthinking this supply pressure because a lot of the selling has already happened.
Some of it triggered by margin funding, some of it triggered by the calamity in January where a lot of the buying that was done through warehousing was actually sold off post the Ketan Parekh issue.
So, a lot of these things have happened. And when you look at the volume pattern of the last two weeks, you actually see reduced volumes on the way down, so that shows that there was very little selling going on.
But the only thing was the sentiment was so poor that the buying had not started. Now, the reverse of that is actually possible that once the buying starts and there are a lot of funds that have been sitting on cash only nibbling away and if they start deploying the cash and inflows that they are getting into the year end, which is the final month of the financial year, then you actually end up getting a lot of buying with very little selling because the selling is already done. So, this whole thought that there is supply at every level, I do not think that is an overthought out fear. It may not really turn out that way.
And most of the macros have actually turned favourable. So, you do not only have government liquidity that was already put in place since the start of February from the budget, the RBI, the rate cut, all of those things have been there.
We are just waiting for the time that it starts kicking in and even at the global front, the two fears that we had, which is rising bond yields or the rising dollar, both have backtracked in the last two to three weeks.
The dollar is falling. It is probably going to break the 20-week average this week. Bond yields have already been falling and have gone past those levels in the previous week itself.
So, both of those macro trends which were the risks have abated. And at the local side, the USD-INR or the rupee, which was the weakest link in this entire story, has also stopped making new lows.
So, you have not seen the USD-INR go to a new high in the last 10 days even when the Nifty was falling and that is something as we call it, intermarket divergence between the currency pair and the Nifty which is typically a bullish indication that there is no more fear going on in the macro, it is just the market selling off on the pending fears or pending sales at some level. So, most of that, like I said, if the selling is done, you are not going to get that supply at the upper end, so the volatility is sort of going to be behind us.
Also, help us understand what is happening with Nifty Bank because there have been some days in the market where the market is overall underperforming, but Nifty Bank has managed to hold on pretty well. Today, also, it is up with gains of eighth-ten of a percent. What are the next levels to watch out for when it comes to Nifty Bank going ahead?Rohit Srivastava: For the Nifty Bank, the good news is that it is actually not broken below the low that it made in January. So, it has actually been an outperforming index, that is pretty much clear. It is in the process of trying to break out of this downward trend.
If it closes above 48,600, that would be a good sign that we have some sort of recovery starting. The second level to watch out for will be around 49,200. Once we do that, then going past 50,000 towards 51,000 or 52,000 should not be so difficult. But banking, by its sheer outperformance, is indicating that it is likely to remain a stronger sector in the weeks ahead.
