Nifty set to touch 16,100, Bank Nifty may hit 36,200 in June 2021; TCS, SBI strong on charts

June 14, 2021 9:21 AM

Strong global cues have been providing impetus as majority of global indices continue to exhibit strength and hit lifetime highs. Domestic market is witnessing strong positive correlation with its global peers

NSE, Nifty, bank niftyThe current breather in Nifty should be used as an buying opportunity for up move towards our target of 36200 in the month of June 2021

By Dharmesh Shah

Equity benchmarks endured their winning streak over the fourth consecutive week buoyed by easing lockdown restrictions in the country. Nifty concluded the week at 15799, up 0.8%. Broader market relatively outperformed as Nifty midcap and small cap gained ~3%, each. Sectorally, IT, pharma, PSU outperformed while financials took a breather

Nifty technical outlook

– The index continued with its record setting spree over third consecutive week as Nifty clocked a fresh all time high of 15835. The weekly price action formed a bull candle with small lower shadow, highlighting elevated buying demand as intra-week dips were bought into. On expected lines, small cap index scaled to fresh all time high supported by faster retracement as nine quarters decline retraced in just five quarters, indicating structural improvement
– Going ahead, we expect the index to extend its northbound journey and gradually head towards our earmarked target of 16100 in June 2021. Our constructive view is backed by following thesis:
a. The formation of higher high supported by improving market breadth highlights robust price structure. Currently 94% components of Nifty 500 index are trading above their 50 days EMA compared to May reading of 86%, indicating broader market participation
b. Strong global cues have been providing impetus as majority of global indices continue to exhibit strength and hit lifetime highs. Domestic market is witnessing strong positive correlation with its global peers
– We believe, move toward 16100 would be in a zig-zag manner as bouts of volatility owing to overbought condition of weekly stochastic oscillator (currently placed at 97) can not be ruled out. Therefore, any dip from here on should be capitalised on as incremental buying opportunity in quality large cap and midcaps as we believe strong support for the Nifty is placed at 15400. Our earmarked target of 16100 is based on:
a. Price parity of post budget rally (13597-15432), projected from April low of 14151, at 16055
b. Past two months consolidation (15140-14150) breakout target at 16120
– Sectorally, IT, Infra and Consumption are expected to lead while BFSI and Auto offers favourable risk-reward setup
– On the stock front, we remain constructive on TCS, Tata Motors, SBI, Ashok Leyland, SAIL, Titan Company, Cipla while, in midcaps we like DCB Bank, Glenmark Pharma, Mindtree, Intellect Design, Mahindra Logistics, Godrej Properties, Greaves Cotton, SKF India

We believe, move toward 16100 would be in a zig-zag manner

– In line with our view, broader market indices relatively outperformed the benchmark and scaled to fresh all time high. The outperformance has been backed by improving market breadth as currently average 92% index components are trading above their 50 days EMA compared to May reading of 85%, indicating inherent strength that augurs well for durability of ongoing up move
-Structurally, the formation of higher high-low highlights elevated buying demand that makes us confident to revise support base at 15400 as it is confluence of:
a. As per change of polarity concept, earlier resistance of 15400 would now act as a key support
b. 61.8% retracement of past three week’s rally (15145-15835), at 15409
c. Last week’s low is placed at 15374

Bank Nifty outlook

The index snapped a three weeks up move and closed lower by 0.6% on weekly basis amid profit booking after a sharp up move of more than 11% in just three weeks. The weekly price action formed a small bear candle with a lower shadow highlighting a breather after recent sharp up move.

– Going ahead, we believe the current breather should be used as an buying opportunity for up move towards our target of 36200 in the month of June 2021 as it is the confluence of the 80% retracement of the entire last three months corrective decline (37708-30405) and the price parity with previous up move (30405-34287) as projected from the recent trough of 32115 signalling upside towards 36200 levels
– In a smaller time frame the index has witnessed a shallow retracement as it has already taken eight sessions to retrace just 38.2% of its preceding eight sessions up move (33274-35714). A shallow retracement highlights a robust price structure and a higher base formation

We do not foresee the index breaching the crucial support area of 34400-34000

– We do not foresee the index breaching the crucial support area of 34400-34000 as it is confluence of the following technical observations:
a. The 38.2% retracement of the current up move (32115-35810) placed at 34400
b. The value of the rising demand line joining lows of April 2021 and May 2021 is placed around 34400
c. The recent breakout area and the April high (34287).
d. The rising 50 days EMA placed at 34005 levels

(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

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