Nifty IT ready for a U-turn, says JM Financial, puts weight behind largecap

The Nifty IT index had witnessed 7.7% decline so far this year as opposed to the surging by 1.4% while the ratio of NSEIT viz-a-viz the Nifty has declined to 1.48 levels against a high of 2.25 levels in December 2021, indicating a massive underperformance of 34% in a span of 2.5 years.

“With the index trading in a range, we believe it has a potential to move towards 1.72-1.75 levels in the near term,” said Neeraj Agarwal, analyst at JM Financial.

Further, the report states that the has a strong price seasonality in the second half of the calendar year, as in the last 10 years too, the index has closed in the green in the 3rd quarter and the 4th quarter on 7 occasions, each with an average up-move of 8.9% and 4.7% respectively.

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Technical Placement

The NSEIT index has declined from a high of 38,560 levels to a low of 31,320 as on yesterday. It has almost retraced 59% of the larger move as observed during the period April 2023 to February 2024. The retracement levels of 62% typically acts as a strong support zone, currently placed at 30912 levels, suggesting limited downsides from the current levels, added Agarwal.

He further states that the range of 31,200-31,400 levels coincides with the previous strong resistance zone, which should now act as a strong support zone. A move above 34,310 levels will negate the formation of lower top lower bottom pattern.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)