Did you know Nifty's anniversary dates lead to remarkable swings?

Anniversary dates invariably lead to remarkable swings. Hence, recent congestion phase (10,600-11,100) appears to be entering a matured phase, Pritesh Mehta, Lead Technical Analyst, Institutional Equities, YES SECURITIES, said in an interview to Moneycontrol's Kshitij Anand.

Edited excerpts:

Q) How do you see the week panning out—any important levels to watch out for? Will the Nifty stick to 11,000 and above?

A) Price volatility resulted in huge swings on both sides in the last week's trade. A roller-coaster ride eventually ensued a negative weekly return (down 0.7%). Some positive global cues helped the Nifty reclaim 11,000 levels towards the close of the trade on September 9, which is a positive sign.

However, the volatility does not portray the real action on Dalal Street. Despite the massive 200+ points cut in September 3 session, it marked a higher bottom (as it managed to sustain above the recent bottom of 10,637) and staged a recovery thereafter, culminating in 98 points up move on September 6, with a follow-up rally of 57 points on the upside.

As per Gann analysis, September 7, 2016, was an anniversary period when index formed a major top of 8,969. Similarly, on September 8, 2015, the Nifty formed a major bottom of 7,540.

In both the instances, the Nifty delivered a big directional move post the anniversary span.

However, in the first week of September 2017, it failed to provide any conclusive move.

In 2018, on September 7, the Nifty recorded in a formation of a top, as index reversed after marking a peak of 11,603.

Anniversary dates invariably lead to remarkable up/downswings. Hence, the recent congestion phase (10,600-11,100) appears to be entering into a matured phase.

Q) What is your call on currency? Any levels which investors should keep in mind?

A) The inability to sustain at higher levels pulled USD-INR pair lower in previous week's trade. The pair is expected to digest its recent wild swings, hence consolidation between 71.5-72.50 is the likely scenario in the medium term. As the same coincides, with a point of polarity zone.

Q) Also, gold is gathering steam and is within touching distance of 40,000. What will you advise investors, buy or wait for cooloff? Are ETFs and gold funds better or physical gold?

A) We expect gold prices to digest the recent sharp up-moves. With immediate resistance placed between 39,500-40,000 (future levels) zone, gold is expected to retest levels of 37,400-37,000 on the downside. From a long-term perspective, investors can accumulate during pullback action.

Q) Small and midcaps are looking attractive after the recent correction. Should investors start increasing their allocation towards this space and why?

A) A pop-up trade is visible within the quality midcap names. Ratio chart of the Nifty Midcap/Nifty index shows a structure of falling wedge at play.

In last week's trade, the ratio bounced back from the low of 1.40 and conquered the half-yearly mean. Sustenance above 1.44 is essential for the Nifty Midcap 100 index to outperform the benchmark index.

The weekly chart of NSE 500 witnessed two consecutive inside bars with closing near week's high. It suggests an increase in broad-based participation.

Historically, it is observed that whenever the benchmark index is stuck in a congestion phase (10,600-11,000), momentum tends to shift towards broader markets.

However, with a long-term view in mind, sticking with the largecaps would be the preferred approach with the market stuck in a congestion phase.

Q) Despite recent measures, FIIs continue to pull money out of the Indian market. Can we now safely say that the selling is due to global factors, as on the policy front, government has taken steps to boost sentiment?

A) FIIs continue to remain bearish largely given macro headwinds on the domestic front as a grim outlook on corporate earnings, along with sharp depreciation of USD-INR pair in past few weeks, led to an acceleration of selling seen on both cash and derivatives markets.

Structure of Indian markets within the EMs (emerging markets) space looks relatively weak. The weekly chart of Nifty/MSCI emerging markets index suggests that it is likely to digest prior out-performance as recent outperformance has breached ascending trendline support.

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