Nifty's 25K breakout has more legs, smallcaps signal risk-on mood: Geojit's Anand James
Nifty
's breakout above 25,000 reflects strong momentum, with
42% of its constituents being at least 10% below their respective September peaks, says Anand James, Chief Market Strategist, Geojit Investments Limited.
In an interview with ETMarkets, he breaks down the signals in
smallcaps
,
defence
, and
banking
stocks, while flagging key breakout trades like
Adani Green
and
Jindal Steel
to ride the bull wave.
Edited excerpts from a chat:
Nifty crossed 25k with conviction during the week. Now how strong are the chances of sustaining the level after a 4.2% rally in just 5 trading sessions?
The quick ascent is characteristic to trending markets. But Nifty is still 4.6% below the record peak hit in September 2024, while 42% of its constituents are at least 10% below their respective September peaks. Also, only 14% of the constituents are above the upper Bollinger band, suggesting that we could have more leaders stepping in and helping Nifty continue the ascent. Also, Nifty is only 2.5% away from the 20-day SMA, pointing to more room for upsides.
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We saw a massive rally in small caps which indicates that the risk-on mode is back with a bang suddenly on Dalal Street. How do you read this strength in smallcaps?
Yes, we see that markets are in a risk-on mode, and hesitation for the small cap index previously visible is not present anymore. That said, there is no froth either yet, with only 14% of the Smallcap 250 index constituents having an RSI of 70 or above, suggesting overbought conditions and 40% of small cap stocks having an RSI below 60 pointing at more leg room higher. Also, only 22% of the small caps have risen above their September peaks, echoing the same sentiments. Further only under 30% stocks are above 2 standard deviations from 20 day SMA, suggesting that we are not yet extreme situations yet, which augurs well for a more broad based strength in the small cap space.
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All those investors who had sold (booked profits or losses) in defence stocks are now having FOMO. Given that the rally is coming after months of weak performance, does it have enough legs for a longer run?
The bullish momentum in defence stocks continued, with most stocks successfully breaking above their weekly supertrend levels. However, the average daily RSI has now surged past 70, entering the overbought zone. This suggests that the sector may be approaching a near-term exhaustion phase.
Stocks such as GRSE, Mazagon Dock, Data Patterns, and BDL, which have seen significant gains, could be vulnerable to profit booking. While a final leg of upside may still be in play early in the week, caution is advised as overbought conditions could trigger short-term corrections. Investors should watch for signs of reversal or consolidation in high-flying names. On the other hand, Cochin Shipyard and BEL appear poised to emerge as potential outperformers in the coming sessions, possibly benefiting from rotational buying within the sector.
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Nifty IT outperformed Bank Nifty during the week with a wide margin. Where would you place your bets going ahead?
The outperformance in Nifty IT index over this week rode on Monday's steep rise. The IT index showed signs of exhaustion as the week progressed, unable to surpass Monday's high. This inability to break resistance, coupled with a 60% short buildup across IT stocks, suggests a cautious stance in the near term.
Despite this, the weekly charts for heavyweight IT stocks remain structurally positive, indicating that the current phase may be a healthy consolidation before the next leg of the uptrend. In contrast, the Bank Nifty appears poised for gains, supported by strong technical and derivative cues.
A significant 75% of banking stocks have seen short covering on a weekly basis, and 58% witnessed fresh long positions today, reflecting growing bullish sentiment. Major players like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Bank are showing average RSI values around 57, suggesting ample room for further upside.
The only notable laggard is SBI. With rate sensitives in focus amidst expectation of policy easing by RBI as inflation has come down, the banking sector could remain positive. That said, some of the IT index constituents are yet to see the breakout move that has begun to become visible across sectors. Towards this end, we do not recommend a complete sectoral rotation, but a stock wise shuffling may be advised to make the most of this phase.
Apar Industries' shares rallied 35% amid solid numbers from Q4 results. Do you see profit booking ahead?
Approach of 62% fibo of the Jan-April move as well as the vicinity of the November 2024 trough (8574) makes a case for limited upside this week. But this period may not mark an end to the uptrend, despite the steep run higher since 7th of April. Dips may be bought, with downside markers placed below 7,400.
Give us your top ideas of the week to make the most of the bull run.
ADANI GREEN (CMP: 1,020)
View - Buy
Target - 1,075
Stoploss - 943
The stock has broken above the horizontal channel resistance and ended both the day and the week with a bullish Marubozu candle, indicating strong positive momentum. The monthly SMIO is also on the verge of crossing above the zero line, and the stock has closed above the 20-week moving average for the first time since September 2024—further confirming the potential for an upside move. We anticipate the stock to advance towards 1,075 in the coming weeks. All long positions should be protected with a stop-loss placed below 943.
JINDAL STEEL (CMP: 981)
View - Buy
Target - 1,060
Stoploss - 914
The stock has broken above the declining weekly trendline resistance this week and concluded the week with a strong Bullish Marubozu candle, signaling renewed positive sentiment. It has also closed above the 50-week moving average for the first time since December 2024.
Additionally, the monthly SMIO is nearing a crossover above the zero line, suggesting the potential for a sustained upward move. We anticipate the stock to head towards the 1,060 level in the coming weeks. Long positions should be safeguarded with a stop-loss set below 914.
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