CAS' wild swings now an exception rather than the rule: Anand James

Anand James, Chief Market Strategist at Geojit Investments says incorporating the CAS market action into the final analysis makes chart reading more interesting and nuanced.

After a good run in the last few months that saw the mid, smallcap indices outperform their large peers, Anand James, chief market strategist at Geojit Investments, told Rex Cano in an email interview that broader indices may still have room to advance, though the pace of gains could moderate after August's sharp outperformance. Edited excerpts: In recent days, Sensex and Nifty registered the day's high and low in the Closing Auction Session (CAS). Do these late movements impact readings on the technical charts? Volatility between 3:15-3:30 PM has significantly narrowed post the first week of CAS introduction, and wild swings are now an exception rather than the rule. That said, incorporating the CAS reading into the final analysis makes chart reading more interesting and nuanced. This involves ignoring the Highs and Lows at times, or giving more priority to hourly candles prior to 3 PM. The Nifty moved in a tight range (less than 1 per cent) on most days last month. Do you expect volatility to rise in the coming period, and what is the likely direction the index may take? Though the average range remained subdued, the Nifty slipped below the recent trading band, raising fears of a large crackdown to as low as the 23,000-mark. However, the Volatility Index (VIX) is not far from its record low suggesting that traders are comfortable with where prices are now. This, along with FIIs' long build-up last week sets up conditions for a pull back. However, should we crack below 23,800 on the Nifty, volatility expectations will rise. Mid- and small-cap indices outperformed the Nifty by a wide margin in August. Is there more room left for broader indices? What are the key levels to watch out for? Yes, broader indices may still have room to advance, though the pace of gains could moderate after August's sharp outperformance. The Nifty Smallcap100 remains in a long-term uptrend, supported by a monthly Relative Strength Index (RSI) above 60 and an early-stage bullish Moving Average Convergence-Divergence (MACD) crossover. However, in the near term, the index is trading within a rising wedge pattern and approaching a key resistance zone at 20,800-21,000, where profit booking could emerge. As long as it holds above the 19,900-19,800 support region, the outlook remains positive, with a breakout above 21,000 likely triggering the next leg higher. The Nifty Midcap100 exhibits a higher high-higher low structure on the weekly chart, reflecting an ongoing uptrend. A sustained hold above 62,350 could revive momentum and push the index towards 64,800-65,000, while a break below it may lead to a correction towards 62,050-61,500. Within equities, how should the investment corpus be divided among large-, mid- and small-cap stocks? We are inclined towards a tactical positioning now, rather than an allocative approach. Our preference is towards large mid-caps for September, until the base formation seen in the low mid-and small-caps can translate into a sustainable up move. Going forward in 2026, which sectors are likely to outperform from a technical perspective, and why? Capital Markets and Tourism appear well placed to outperform, supported by constructive chart structures and improving momentum indicators. The Nifty Capital Markets Index continues to trade within a weekly bullish pennant formation and is comfortably positioned above its 100- and 200-day moving averages, reinforcing the strength of the long-term trend. A breakout from the pennant could open the door towards the 5,550-5,700 zone. Meanwhile, the Nifty India Tourism Index is showing early signs of a trend reversal. More importantly, the monthly MACD is attempting a bullish crossover, a higher-timeframe signal that often precedes sustained rallies. Where do you see the Sensex/Nifty settling by the end of 2026? We have had just three positive months this year so far, and that is unusual. Further, October through December is usually a strong period, especially when the preceding months have underperformed. This improves the chances of a rise in the coming months. However, given the unusually low VIX and narrow trading ranges through the year, caution continues to be the watchword. The extent of the rise in the last three months of the year will depend on how far September is willing to give way. We have our downside marker near 23,000, which if not breached can set up a rise that could propel Nifty to new peaks. Disclaimer: Views and outlook shared on the stocks/market indices belong to the respective analyst/brokerage and are not endorsed by Business Standard. Readers' discretion is advised. Click here for analyst disclosure.