The chart pattern suggests that if Nifty crosses and sustains above 16600 level it would witness buying which would lead the index towards 16800-16900 levels.
By Rajesh Palviya
Nifty closed at 16529 with a gain of 291 points on a weekly basis. On the weekly chart, the index has formed a long Bullish candle forming higher High-low compared to the previous week and has closed above previous week’s high indicating positive bias. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating positive bias. The chart pattern suggests that if Nifty crosses and sustains above 16600 level it would witness buying which would lead the index towards 16800-16900 levels.
However, if the index breaks below the 16350 levels it would witness selling which would take the index towards 16200-16000. Nifty is trading above the 20 and 50 day SMA which are important short-term moving averages, indicating positive bias in the short term. Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Nifty to trade in the range of 16900-16300 with a positive bias.
The weekly strength indicator RSI and momentum oscillator Stochastic have both turned positive and are above their respective reference lines indicating positive bias.
Nifty Derivative Outlook
Nifty futures closed at 16517.35 on a positive note with 10.81% increase in open interest and with price gains of 1.63% indicating Long Build Up. The open interest position of FII’s in Index Futures is at Rs 15,936 increased by 995 crore and in Stock Futures it is at Rs 1, 13,045 increased by 2,999 crore. PCR OI during the week has made a high of 1.73 & low of 1.23 and closed on a weekly basis at 1.73 levels. PCR OI currently is at 1.73 levels which is well above the median line and at elevated levels and further move towards higher level will indicate caution in market.
Options Built-up Shows that for now, Nifty has strong support at 16,400 followed by 16,300 & 16,000 and resistance. 17,000, 16,500 & 16,400 strike CALL and 16,300 strike Put followed by 16,200 & 16,000 strike has high open interest concentration which suggests that Nifty is likely to trade between these levels of 16,700 on upside & 16,300 on downside for the coming week; with 16500 acting as a pivotal level as both Call & Put have high OI concentration at 16,500 strike price. This week major addition in monthly expiry was seen on the PUT front with 16,500, 16,400 and 16,300 strikes adding 21.40 lakh,12.85 lakh and 10.33 lakh shares in OI respectively; while there was no significant unwinding witnessed in any strike. This week major addition in monthly expiry was seen on the CALL front with 16,800 and 17,000 strike adding 5.36 lakh and 5.28 lakh shares in OI respectively; while unwinding was witnessed in 16,000 & 15,900 strike to the tune of 1.88 lakh & 2.91 lakh respectively. Implied Volatility of option for the current series is at 13.41% in contrast to 12.12% of last week, while in the coming week trajectory is likely to be flat-to- marginally increasing. FII have been Net BUYERS in Index Future to the tune of 584 crs during the last week.
Bank Nifty Outlook
Bank Nifty started the week on a flat note and remained in a narrow range(36300-35500) throughout the week, indicating lack of strength on either side. Bank Nifty closed at 36169 with a gain of 360 points on a weekly basis.
On the weekly chart the index has formed a small Bullish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction. Since the past three months, the index is consolidating within 36200-34000 levels indicating short term consolidation. Hence any either side breakout will indicate further direction.
The chart pattern suggests that if Bank Nifty crosses and sustains above 36300 level it would witness buying which would lead the index towards 36700-37100 levels. However if the index breaks below 35600 level it would witness selling which would take the index towards 35200-34500. Bank Nifty is trading above 20 , 50 and 100 day SMAs which is an important short term moving average, indicating positive bias in the short term. Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Bank Nifty to trade in the range of 37100-35400 with a positive bias.
The weekly strength indicator RSI and momentum oscillator Stochastic have both turned positive and are above their respective reference lines indicating positive bias. Bank Nifty futures closed at 36211.75 on a positive note with -1.64% decrease in open interest and with a price gains of 0.75% indicating Short Covering. Bank Nifty has a strong support at 35,000; as 35,000 Put strike is having high OI concentration followed by 34,500 & 34,000 while on the Call front 37,000CE strike has high OI concentration indicating strong resistance level followed by 36,500 & 38,000 while 36,000 will act as a pivotal level.
Sectors and stocks to watch this week
We expect the IT, Metal, Capital Goods, Chemical and FMCG, cement sectors to do well in the near term. Stocks such as TCS, Titan Company, Bata India, L&T, Cummins, Tata Steel , KPIT Tech , Polycab can do well in near term .
(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)