Investors holding IT shares are at a critical juncture, as an expert advises booking profits with the Nifty IT index nearing a significant resistance zone between 29,600 and 30,000. This counsel comes after a remarkable rally in IT stocks from lower levels, but the current valuations are deemed risky given the index’s historical struggle at these thresholds.
On Friday, the IT index touched an intraday high of 29,380, briefly crossing above its 100-day moving average (DMA) for the first time in approximately five months. While the 100 DMA stood at 29,270 that day, the index ultimately closed slightly below it, signaling the start of a cautious period.
The 29,600-30,000 range has historically proven to be a formidable barrier for the IT index. Between April 24 and May 19, the index tested this range four times, failing to sustain any breakout and closing lower on each occasion. A brief surge on June 1 saw it cross 30,000, hitting 30,238, but it again retreated by market close.
The most telling instance occurred on June 2, when the IT index finally achieved a breakout, closing at 31,116. However, this optimism was short-lived. The very next day, news concerning Anthropic emerged, causing the breakout to fail spectacularly. The index subsequently tumbled, falling a staggering 18% by July 1.
Following this sharp decline, the IT index found support around the 25,600 level and has since recovered, climbing approximately 3,000 points to re-approach the 29,600 mark. This recovery, while strong, brings it directly back into the previously established resistance zone.
The strategic implication for investors is clear: avoid fresh buying at these levels. Instead, those who bought at lower prices should consider booking profits within the 29,600-30,000 range. A renewed buying opportunity, according to the expert, would only emerge if the IT index decisively closes above 30,250, signaling a robust new breakout. This approach prioritizes selling into strength at resistance rather than chasing rallies, aligning with a prudent investment strategy.
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