rewrite this title and make it good for SEOTechnical setup signals near-term pain, but momentum may return next week: Rahul Sharma

“So, from a derivative standpoint, 25,000 is a crucial support, whereas from a technical perspective 25,200 is something where we are expecting markets to take support and once we have some positive development on the upside, the moment we cross 25,550, 25,600 that is when fresh momentum can also come back. So, at this point in time, it is not really heading anywhere in a big way. We expect the downward grind to continue but once probably we are done with the correction, probably next week onwards we could see momentum coming back into the market,” says Rahul Sharma, JM Financial Services.

We start with the indices first and at present it is a downtrend both in benchmarks as well as the broader markets.Rahul Sharma: Market is the greatest teacher of all and today is one of those sessions where essentially the markets have been lacklustre. We have seen many days of range bound movement happening. We have seen drop in volumes in a significant way especially in the index futures which is Nifty futures I am talking about.

So, finally, this grind is eventually seeing itself into a small correction of sorts. So, we expect this downward slide to probably progress towards 25,200, 25,150 max to max and on a closing basis 25,000 should be a very strong support like given the kind of put writing that we have seen at the very beginning of this July series.

So, from a derivative standpoint, 25,000 is a crucial support, whereas from a technical perspective 25,200 is something where we are expecting markets to take support and once we have some positive development on the upside, the moment we cross 25,550, 25,600 that is when fresh momentum can also come back. So, at this point in time, it is not really heading anywhere in a big way. We expect the downward grind to continue but once probably we are done with the correction, probably next week onwards we could see momentum coming back into the market.

I want to ask you about the IT sector. Today TCS results are also there and two out of four days it has been down only, continuing the downfall today as well. What is your expectation? How should one take position in IT sector?Rahul Sharma: Yes, so the good thing entering into the result is the expectations are very low. So, the markets are not really expecting any fireworks from the results space given the kind of uncertainty we have had in the US economy, given the kind of AI challenges that our companies that have faced. So, the expectations are pretty low. In case there is any positive surprise from the numbers, especially from TCS, that could stabilise the IT index as such but even if it happens, it could be short-lived and overall the technical setup of the IT index is not really comforting at this point in time. And in case the numbers tend to be lower than expectations, that could mean the IT index could take a cut of around 2% to 3% in the short term. So, the outlook on the IT index continues to be cautious. Whether it is TCS or any of the other IT names, it is prudent to see the results through and then probably take a decisive position in the same, pre-emptive is something that we are not advising clients at this point in time.Also, want your views on the banks and financials because if we have a look at the credit growth scenarios, the deposit growth scenarios, and even before the results coming in for the banks and financials, the quarterly updates are showing signs and signals of positivity. Is it the same expectation from your end as well because banks and financials we consider it as the backbone of the economy and all the eyes will be on the results for the same.Rahul Sharma: Yes, absolutely bang on. In fact, it is banks and financials which have led this market turnaround that we had a few a couple of months back and in this quarter also we are expecting the numbers to be relatively good and that is exactly the reason why Bank Nifty is not seeing the kind of weakness that would have otherwise happened given the kind of market texture that we have at this point in time.

So, banking and financials continue to outperform and once we have more clarity on the numbers, that would be a fresh trigger for the banking and financial space to go higher. Having said that, one of our recommendations today is from the financial services space. So, Jio Finance in particular looks good for a trading buy at this point in time. One can look to buy for a short-term target of Rs 350 on the upside, stop loss placed at 320.

The stock is defying gravity over the last few sessions and has held on well technically, the RSI remains in a strong 70 plus zone. Overall, we expect the stock to do well. So, from the financial space Jio Finance looks to be our top pick at this point in time and one can look to buy for a trading outcome on the same.