Time to book profits in power stocks; India heading towards currency risk: Rohit Srivastava

Rohit Srivastava, Founder, Strike Monkey Analytics & Indiacharts, says “one of the ignored factors in our market is the currency itself, which along with Nifty knocking at all-time highs, the USD/INR is also knocking at all-time highs. That is a situation we have really never seen historically and which shows that we have a currency problem that is not being addressed. At some point of time, we are going to see a significant currency risk as far as India is concerned.”


How do the levels look right now and the trading action? Is this bout of weakness yesterday and today backed by volumes?
Surely the volumes are not there. What it looks like is that most of the global markets have actually run up into this Federal Reserve FOMC meeting that we are going into. And with the anticipation that, probably we are done with the rate cycle and things will ease going forward. I am not sure it is that straightforward.


Second, given that the markets have optimistically priced in an event, there is a very good chance you get the classic, buy on expectation, sell on news kind of behaviour. Of course, our markets seem to be reacting both yesterday and today ahead of it but most global markets have held up; US and Europe into the event. And they are getting short term overbought. So that really creates a reason for some kind of selling to come in due to profit booking or whether it is a trend reversal we will only figure out as the pattern develops.

But we have priced in a lot of the positives. You have the holidays getting closer and closer for the second half of December, which should see the momentum wane and that is, I think, sort of why you are seeing this sell-off in equity.

Given the scenario, what is the best tactical trade right now within sectors, stock-specific at the index level?
That is slightly tough because a lot of these sectors that were doing well have already run up a lot and they are seeing reversals on the momentum indicator, whether I talk about realty index or pharma, they are all losing momentum as of now. The RMI indicator that we use is giving sell signals on many of these key sectors so it is slightly difficult to take a bullish trade here. If at all, we will take one, we will possibly take a bearish trade and start with the index and, of course, the sectors which have moved up the most, then can give you a correction as well.

But yes, we will look at the sell side, starting with the index, as and when position size into it. If there is a bounce at the second half of the day today, that would give a good opportunity to sell into it.

Some of the pharma stocks are coming back, DRL has come back, Auro has come back. Would you bet on any of the chart setups looking good in pharma?
I am trying to take a slightly micro call like the pharma index has sort of achieved the objective that we were looking for in this particular rally. Once the index has done that, will I go down and drill into? Okay, is there still a pharma stock that looks good? Short term, definitely we will not do that because we will not trade against the index view. That only leaves us thinking slightly longer term.

My sense is that as we are getting closer and closer into 2024, I do not want to be buying anything here, even from an investment standpoint because of the various risks that were there on the table, maybe a month back, which today looks like, oh, there is no risk, let us buy something. I think that is the misnomer. You need to pay attention to risk. Once you have had a good rally, will the US economy really slow down and impact the Indian market as well? The possibility is pretty high.

In fact, and I have been talking about this, one of the ignored factors in our market is the currency itself, which along with Nifty knocking at all-time highs, the USD/INR is also knocking at all-time highs. That is a situation we have really never seen historically and which shows that we have a currency problem that is not being addressed. At some point of time, we are going to see a significant currency risk as far as India is concerned. This is something I have been highlighting. I am sure the RBI will deny it, but I think there is a problem.

Just coming back to the stocks, what would you recommend to do in power and power ancillary stocks? I am including the financiers as well, which are sitting at record high levels.
So if I put it in two words, I will say book profits.