Nifty Smallcap follows LIFO model, be picky; 3 top ideas for the week: Kunal Shah
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Synopsis
Kunal Shah highlights Nifty Smallcap's LIFO model and market volatility. Nifty index remains bearish, with strong support at 21900-21850. Nifty Bank sees resistance at 47000 and support at 46500. Consider SIP for investment strategies in the market. Shah also says: The support zone at 8200 could serve as an excellent opportunity to add new long positions across the entire basket of stocks.
“Volatility is expected to persist in the near term, necessitating a stock-specific approach. Similarly, the Midcap Index is also likely to experience volatility, and investors should consider utilizing a disciplined investment strategy like SIP (Systematic Investment Plan) to add to the index or strong-value stocks during market dips,” he says. Edited excerpts from a chat:
Kunal Shah: The Nifty index maintains a bearish undertone as long as it remains below the level of 22250. Currently trading below its 20-day moving average, situated at 22220, a decisive break above this level would signal a potential reversal. However, the index faces a strong lower support zone at 21900-21850, and a breach below this on a closing basis could exacerbate selling pressure towards the 21500-21300 zone.
Given the 3% cut seen in the banking index, how should traders position themselves for the week ahead?
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Midcap and smallcap indices bled heavily. Do you see more pain ahead? Is it time to buy the dips or wait for the dust to settle down?
Kunal Shah: The Nifty Small Cap Index adheres to the LIFO model, where the last stocks to enter the index tend to be the first to exit during a bull market. Volatility is expected to persist in the near term, necessitating a stock-specific approach. Similarly, the Midcap Index is also likely to experience volatility, and investors should consider utilizing a disciplined investment strategy like SIP (Systematic Investment Plan) to add to the index or strong-value stocks during market dips.
PSU stocks were among the worst hit. Do you see the possibility of the Nifty PSE index breaking down further?
Kunal Shah: The Nifty PSE Index has experienced a breakdown from its rising trendline on the daily chart, indicating a bearish trend. Pullbacks in the index present favorable opportunities to initiate selling positions. The index faces strong resistance at the 9000 mark, while the lower end finds support at 8200. This support zone at 8200 could serve as an excellent opportunity to add new long positions across the entire basket of stocks.
Stocks Recommendations
1.) STOCK NAME: BUY IRCTC IN THE RANGE OF 900-890, SL-860, TGT 950/1000
2.) STOCK NAME: BUY GRAPHITE AT 610 , SL-590, TGT 650/670
RATIONALE: Despite market volatility, the stock has experienced significant buying pressure from lower levels. This is evidenced by its breach of the 20-day moving average (20DMA) with strong volumes, indicating a bullish sentiment. Furthermore, the momentum indicator RSI is showing signs of reversal from lower levels, confirming a buy signal. The stock has a solid support level at 590, serving as a cushion for bullish momentum. Upside potential targets for the stock are set at 650 and 670.
3.) STOCK NAME: BUY ITC AT 420 , SL-400, TGT-450/470
RATIONALE: The stock has experienced a consolidation breakout after forming a base on the daily timeframe. The recent increase was supported by a rise in volume. Furthermore, the stock has moved above the near-term moving average. Additionally, a positive divergence is evident in the RSI, indicating a bullish shift in price momentum. In the short term, the stock may continue its upward movement with the potential to reach towards 470. Support on the lower end is situated at 400.
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