Nifty looks on track to end the month on a negative note. What would be your trading strategy on the monthly expiry day, particularly because it comes just ahead of the Budget?
With a 2% negative return so far, January appears to end the same way as December which also closed 2% down. But despite the consecutive negative months, it must be noted that unlike October 204, which saw a 6.2% fall, the subsequent months’ close have not been too deep in the red, pointing to the presence of buying interest. This is visible as we head into the budget week, which usually rides on positive expectation despite history pointing to muted reaction on budget day as well deeper cuts in February. However, given the parallel consolidation that we are in, for the last few days, we are encouraged to look for a positive surprise that could aim for 23850-23950. Negative surprises, in the event of rejection trades yet again from 23400 or a direct fall below 22940, could aim for 22260, but the prospects of the same look limited for now.

If Nifty ends the January series on a negative note then it will be the fourth consecutive month of negative closing. Do you see chances of a mean reversion happening in February?
Yes, this is the first time after 2001 that the Nifty50 is falling for the fourth consecutive month. In 2001, Nifty50 fell an average 6% in four months from July to September and was followed by a 5% upside in the following three months. This time around Nifty is down close to 2% as we move into the last week of the fourth month. If Nifty50 recovers and closes for the month positively, we will be looking at different statistics. Since 2000, Nifty50 saw 13 instances of 3 months of consecutive downside and around 70% of the time, we saw an average 3% upside in the next three months. What stands in the way of the upside hopes is the fact that, 58% of the time February months have seen negative returns for Nifty50 in the last 12 years.

Since 2010, the average Nifty return one week before the Budget is -0.46% while one week after is 1.35%. How different would this time – the Budget week and the post-Budget week?
It is noteworthy that 67% of the time in the last 12 years, the week before the Union Budget, has been negative for Nifty50 with an average return of around -2%. During these 12 years, 75% of the time, the week after the Union Budget has been positive for Nifty50 with an average gain of around 2.7%. In addition, 75% of the time when Nifty50 saw negative returns 1 month prior to the Union budget, we saw an average return of 7% in the next 3 months.

We are in the Q3 earnings period and only around 30% of the companies in Nifty50 have come out with their results and only around 30% have reported quarterly profit growth (YoY). Meanwhile, 28% of Nifty50 companies are coming out with Q3 earnings next week with focus on auto majors like Maruti, Tata Motors, Bajaj Auto and TVS Motors. That said, it cannot be forgotten that during 75% of the time in the last 8 years, Midcap150 and Smallcap250 have fallen an average of 3% and 4% respectively in February.
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Wipro was among the top gainers in the BSE500 pack during the week. Given the earnings backdrop and positive news flow coming in, do you see the rally extending in the week ahead?
Wipro is usually a slow mover, but the ongoing uptrend is replete with bullish continuation patterns, which encourages us to stay course for the full extent of the upside prospects. Towards this end, we are inclined to look for prices heading into the Rs 335-360 region in the coming fortnight.

India Cements shares ended the week 22% lower. What are the charts hinting at?
Four consecutive days of sharp falls have taken the stock to the July 2024 support, providing a window for reversal. Oscillators also point to the same, encouraging us to look for a bounce back to 314 to 325 in the coming week, with downside markers placed below 295.

Give us your top ideas for Budget week.

JUBLINGREA (CMP: 690)

View – Buy

Target – 725 – 745

SL – 669

The stock has been on a steep decline since the beginning of this month and seems to be attempting a pullback from near the double bottom support level of 655. The MACD histogram has shown signs of exhaustion at lower levels and the RSI is near the oversold region pointing towards an imminent reversal in coming days. We expect the stock to move towards 725 and 745 levels in the near future. All longs may be protected with stoploss placed below 669 levels.