By Ajit Mishra
Markets have reached record high after 3 months and are currently hovering in a narrow range amid mixed cues. Apart from the continued underperformance of the banking pack, the recent dip in the US markets is largely weighing on the sentiment. Consequently, we are seeing profit taking across sectors and in the broader indices too, after weeks of tremendous outperformance. On the benchmark front, Sensex has made a new high while Nifty missed the same by a whisker but eventually, both inching lower and currently trading at 62,960.30 levels and 18,691.20 levels respectively.
As we are closely eyeing the US markets for cues, the recent dip has certainly turned the mood cautious but sustainability above 33,500 in Dow Jones Industrial Average (DJIA) would keep the recovery hopes alive. Besides, the performance of their broader indices will also be in focus, after the bout of profit taking. Meanwhile, on the domestic front, the scheduled monthly expiry of June month derivatives contracts would keep the volatility high.
Markets are now at a critical juncture and indications are mixed over the next directional move. We thus feel traders should focus on managing risk in their existing positions and wait for clarity. We have highlighted the key levels for both Nifty and Bank Nifty along with a list of stocks which one should closely watch for fresh positions.
Nifty (CMP: 18,691.20) – It has breached the trendline support and is currently hovering around the first line of defensive i.e. 20 EMA on the daily chart. A decisive close below that level would deteriorate the mood and Nifty may find the support around 18,350-18,450 zone. To regain the positive momentum, we need sustainability above 18,850 levels.
Bank Nifty (CMP: 43,641.05) – The banking index has been trading indecisively for the last six weeks and still not offering any cues over the next directional move. We feel either side’s decisive breakout from the 43400-44250 range could prompt the same. Meanwhile, we recommend keeping a check on leveraged positions and utilise dip to gradually add private banking names like ICICI Bank, HDFC Bank and Axis Bank.
Stocks to Watch
Bullish – BHARATFORGE, DABUR, DEEPAKNTR, COLPAL, HCLTECH, IGL, M&M, LUPIN
Bearish – FEDERALBNK, GUJGASLTD, HINDALCO, TCS, UPL, VOLTAS
(Ajit Mishra, SVP- Technical Research, Religare Broking Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)