Chartist Talks: FII long-short ratio hints at Nifty 50 consolidation in coming few sessions despite strong underlying trend, says SBI Securities' Sudeep Shah

The benchmark index Nifty 50 has continued its northward journey for the third consecutive week. Most noteworthy, it has crossed the psychological level of 26,000 mark. Sector rotation has been a steady force, helping sustain these elevated levels over the past few months.

Going ahead, the index is likely to continue its upward journey and test the level of 26,500, followed by 26,750 in the short term. While, on the downside, the zone of 25,900-25,850 will act as immediate support for the index. If the index slips below 25,850, then the next support is placed at the 20-day EMA (Exponential Moving Average) level, which is currently placed at the 25,539 level.

What are the roll-overs pertaining to Nifty & Bank Nifty hinting at?

The rollover for Nifty Index futures was higher at 78.77 percent, compared to the previous month's 77.49 percent and the three-month average of 75.32 percent. Moreover, the rollover cost has surged to 0.31 percent as compared to the three-month average of 0.29 percent. This data indicates the market is likely to continue its northward journey in the next couple of trading sessions.

Bank Nifty has strongly outperformed frontline indices in the September series. The rollover for futures stands at 66.88 percent, slightly lower than last month's 67.75 percent, but above the three-month average of 65.53 percent. Additionally, the rollover cost has increased to 0.40 percent, compared to the three-month average of 0.36 percent.

Do you expect more selling pressure in the Bank Nifty?

Despite the sharp rally in the previous week, Bank Nifty underperformed compared to the frontline indices last week. The index traded within a narrow 725-point range, indicating a significant slowdown in bullish momentum over the past five sessions. On the weekly chart, it formed a Shooting Star-like candlestick pattern, signaling limited upside in the near term. However, the broader trend remains bullish, as Bank Nifty continues to trade above its short and long-term moving averages.

Going ahead, the zone of 53,500-53,400 will act as immediate support for the index. On the upside, the zone of 54,200-54,300 will act as a crucial hurdle for the index. Any sustainable move above the level of 54,300 will lead to a sharp upside rally in the index. In that case, the index is likely to test the level of 55,000, followed by 55,600 in the short term.

What are your top picks based on roll-overs?

Technically and based on roll-over data, Balrampur Chini, BPCL, Exide Industries, Polycab India, Hindustan Petroleum Corporation, Colgate Palmolive, Cipla and Divi’s Laboratories look good.

What does the FII Long-short ratio at 80 percent indicate?

In the latest series, the long-short ratio based on FII index positions is at 79.89 percent, which was highest in recent months. This indicates a strong bullish bias from foreign institutional investors. However, since the ratio is approaching the overbought zone, there could be a slight cool-off implying a possible consolidation in the Nifty 50 for the coming few sessions despite the underlying trend being very strong.

Auto stocks have hit new highs. Do you still feel the Auto space could continue its positive momentum in the coming week, too?

Last week, Nifty Auto index has given a horizontal trendline breakout on a daily scale, and thereafter, it has witnessed strong bullish momentum. Most noteworthy, it has marked a fresh all-time high. The momentum indicators and oscillators are also portraying a bullish picture.

Hence, considering the weekly and daily chart, the index is likely to continue its northward journey and test the level of 28,000, followed by 28,400 in the short term. On the downside, the zone of 27,100-27,000 will act as immediate support for the index.

Polycab India has had a strong weekly closing. What are your views going ahead on this stock?

The stock has given a horizontal trendline breakout on a daily scale. This breakout is confirmed by the above 50-day average volume. Additionally, it formed a sizeable bullish candle on the breakout day, further reinforcing the breakout. The momentum indicators and oscillators are also suggesting strong bullish momentum in the stock.

Hence, we believe the stock is likely to continue its upward journey and test the level of Rs 7,400, followed by the Rs 7,600 level in the short term. On the downside, the zone of Rs 6,930-6,900 will act as immediate support for the stock.

Selective PSU stocks such as Gail, HPCL, and BPCL have witnessed strong moves in the past week. What are your views on the same?

All these stocks are from the Nifty Oil & Gas space. The Nifty Oil & Gas index has recently taken a support near 100-day EMA and thereafter resumed its northward journey. On Friday, it gave a horizontal trendline breakout on a daily scale. Also, it has surged above its 20 and 50-day EMA level, which is a bullish sign. Further, the daily RSI (Relative Strength Index) is about to cross the 60 mark, and it is on a rising trajectory. Hence, we believe these stocks are likely to continue their upward journey in the next couple of trading sessions.

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