Nifty may retest 24,500; fresh highs likely if it holds above 25,000: Rohit Srivastava of Indiacharts

Expert view: Rohit Srivastava, the founder and market strategist at Indiacharts.com, believes the Indian stock market is extremely oversold at this juncture and may recover. He expects the Nifty 50 to head back to 24,500 in the near term. In an interview with Mint, Srivastava shared his views on the current market valuation, Nifty’s expected movement in the near term and sectors to look at. Here is an edited excerpt of the interview:

What is your assessment of the current market structure? Has the market bottomed out, or is it headed for a deeper correction?

For now, the market is very oversold and likely to recover. Short- and medium-term indicators tell us that a seasonal bottom may be formed near 23,700, and we should head back to 24,500 at least.

Nifty is now down 12% from its peak. When do you expect the market to stabilise?

Nifty managed to protect the Jan low today, and Bank Nifty made a higher low. The only weakness was in mid-caps and small-caps, which made new lows. But these inter-market divergences are signs of late-stage capitulation in markets, and we should be close to stabilising from the volatility.

How long may the Nifty 50 take to reclaim the 25k mark? What are the key make or break levels for the index?

25,000 is a 61.8 per cent retracement of the entire fall so far, so if we get past the 50 per cent mark at 24,500, we may get to 25,000 as well. The bigger question is whether we will get past 25,000 because then that can set the stage for new all-time highs again.

I think we can get back to 25,000 if we have to in four to six weeks. It is too early to say whether we can get past that level, but the recent actions by RBI and the central government in expanding liquidity through monetary and fiscal measures have the firepower to allow for higher levels. So we should be prepared and open to the idea.

Is the current market valuation fair?

Yes, we are at mean valuations for the Nifty based on the long-term historical chart of Nifty price-to-earnings (PE).

The problem is with Midcap valuations that are closer to two standard deviations above the mean and that creates discomfort.

What is your outlook for Bank Nifty?

Bank Nifty may also bounce back with Nifty, and a 61.8 per cent retracement is at 51,950 for Bank Nifty. So, we could initially see an attempt to go up to that level. Higher levels would be dependent on crossing it.

What sectors should we buy in this current market downtrend?

This is an interesting question to ask ourselves. Where there is value or growth are two answers.

Technically, the PSU banks are well poised at the bottom end of their channel support.

On the other hand, FMCG stocks look very weak. Interest rate-sensitive sectors like autos can be interesting as some stocks have held their own. Metal stocks may also benefit from rising commodity prices.

How should retail investors navigate the current market volatility?

Investors should focus more on large-cap funds relative to midcap funds, which offer better value and are likely to be lower in volatility.

This should work until long-term valuations normalise. Alternate asset classes like Gold should also be considered in the overall mix.

Do you see opportunities in mid and small-caps at this juncture? What should be our strategy for these segments?

This is going to be difficult as markets do not reward high valuations after a point of time.

A bottom-up approach means finding pockets of growth irrespective of valuation concerns.

Momentum investing might not work as well as it has before. But momentum investing with proper rules of entry and exit can still work if it is a disciplined system that you follow.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.