Our broader positive stance is intact with Nifty gradually heading to 17600 in September 2021 as it is the price parity of July-August rally (15515-16700), projected from mid-August low of 16376
By Dharmesh Shah
Equity benchmarks recorded new highs as Nifty scaled to fresh all-time high of 17436 last week. The Nifty settled the week marginally higher at 17369. The broader markets outshined with Nifty small-cap index gaining around 2% for the week. Sectorally, Telecom, Consumption and Capital goods relatively outperformed
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– The Nifty hit a new high of 17436 and then traded in a tight 200-point range (17250-17436) for the rest of the week. The weekly price action formed a small Doji indicating pause in upward momentum after a sharp 12% rally in just five weeks, that led daily and weekly stochastics in overbought trajectory (readings beyond 90). Meanwhile Nifty small cap index formed sizeable bull candle to record fresh life high indicating continuation of uptrend.
– We expect markets to turn stock specific, while Nifty to undergo a healthy consolidation this week. Hence it would be prudent to stick to buy on decline strategy to accumulate quality stocks as over past 15 months such strategy has worked well for investors. As we do not expect Nifty to breach 16900 in consolidation phase, dips towards psychological level of 17000 would offer incremental buying opportunity in this week
– Structurally, our broader positive stance is intact with Nifty gradually heading to 17600 in September 2021 as it is the price parity of July-August rally (15515-16700), projected from mid-August low of 16376. Sectoral churn amid consolidation would make overall strength healthy going ahead.
– On sectoral front, Consumption, Capital Goods, Realty and Telecom to outperform, while BFSI, Metal offers favourable risk-reward setup
– In large caps we like HDFC (Housing Development Finance Corporation), Bharti Airtel, Kotak Mahindra Bank, Titan, Tata Steel while in Midcaps we prefer Godrej Properties, SBI Cards, Zensar Technology, Gokaldas Exports, Trent, Safari Industries, TCI Express, MCX, Vardhaman Speciality steel
– On expected lines, broader market indices have regained upward momentum and hit new life high confirming broader structural uptrend. We expect stock specific action to continue and broader indices to relatively outperform Nifty in coming week
– Structurally, the formation of higher high and low, signifies continuance of positive bias which makes us confident to revise support base upward at 16900, as it is 50% retracement of current up move (16376 -17436)
Bank Nifty Outlook
– The Nifty Bank traded in a range and closed the truncated week marginally lower by 0.3%. The weekly price action formed a small bear candle which remained contained inside previous week price range highlighting consolidation after recent up move.
– Going ahead, we expect the index to undergo a healthy consolidation this week, thus forming a higher base above the upper band of the recent range breakout area (36200). Our broader positive stance is intact with Bank Nifty gradually heading towards 37700 levels in September 2021 as it is the confluence of the measuring implication of the recent range breakout (36300-34800) and the previous all-time high of February 2021
– The index has recently witnessed a faster retracement of its preceding decline as 10 sessions decline (36317-34817) was completely retraced in just five sessions. A faster retracement in less than half the time interval highlights positive structure
– Buying on declines strategy has worked well over past 15 months. Hence, any breather in the coming week would offer incremental buying opportunity in quality banking stocks
– The index is seen forming higher high-low in the larger degree chart, which gives up confident to revise the support base higher towards | 35300-35500 levels as it is the confluence of the following technical observations:
a) 80% retracement of the current up move (34817-37140) placed around 35300 levels
b) rising 10 weeks EMA also placed around 35650 levels
c) the value of the rising trend line joining the previous lows is also placed around 35480 levels
– The weekly stochastic is seen rebounding from the neutral reading of 50, thus supports the overall positive bias in the index.
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please consult your financial advisor before investing.)
ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 22/04/2021 or have no other financial interest and do not have any material conflict of interest. I-Sec or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months