Chartist Talks: I-Sec’s Dharmesh Shah sees strong Nifty structure despite recent correction; expects index to reach 25,800 in August

Equity benchmarks extended a breather over the second consecutive week amid a lack of clarity on the India-US bilateral trade deal. We expect volatility to remain elevated amid the progression of earnings season, coupled with tariff-related developments, wherein strong support is placed at 24,900-24,800 levels.

Currently, the index is undergoing healthy consolidation wherein over past 10 sessions, Nifty has merely retraced 50% of preceding 10 sessions up move. Slower pace of retracement while trading in the vicinity of 20-day EMA, highlights robust price structure. Hence, any dip from hereon should be capitalised to accumulate quality stocks with strong earnings as we expect Nifty to gradually resolve higher and head towards 25,800 in coming month.

Do you think the rally in Hindustan Unilever (HUL) seen on Friday will continue into next week?

The share price of HUL staged a strong recovery after finding support from five five-year rising trendline, indicating structural uptrend is intact. On the weekly chart, the stock has logged a resolute breakout from a bullish flag pattern, indicating continuation of the uptrend that makes us believe that HUL would extend the ongoing up move in the next weeks as well.

What is your view on Piramal Enterprises, which witnessed a trendline breakout?

As correctly highlighted, the share price of Piramal Enterprises is at the cusp of breaking out of 3 3-year falling trendline backed by a pick-up in volumes, suggesting larger participation in the direction of the trend. Further, price movement since March 2023 lows has been captured in a well-defined upward sloping channel, suggesting elevated buying demand that augurs well for the next leg of the up move towards Rs 1,500 in the coming quarter.

What are your top two stock picks for the coming week?

Power Finance Corporation

The stock corrected 38% in the past 11 months post which it has undergone base formation in the vicinity of 100-week EMA, indicating buying interest at lower levels. Despite recent volatility, the stock managed to hold on to the key support zone of Rs 360-370, indicating buying demand at key support zone.

Key point to highlight is that the stock broke out from a seven-month falling trendline after witnessing supportive efforts in the vicinity of 61.80% retracement of the move from (Rs 225- 580), indicating conclusion of the corrective bias, which augurs well for the next leg of the up-move.

Going ahead, we expect the stock to gradually resolve higher and head towards Rs 478, being a 50% retracement of the previous fall (Rs 580-357) wherein strong support is placed at Rs 388.

Tata Power Company

The Power index snapped two quarters decline and staged a strong recovery. Over the past two months, the stock has been forming a higher base in the vicinity of the 200-day EMA, which has been taking the shape of a rising channel.

We expect stock to eventually resolve higher and head towards our target of Rs 445, as it is the upper band of the rising channel that coincided with the December 2024 high of Rs 447.

In the process, strong support is placed at Rs 374 as it is a 50% retracement of the February-June rally (Rs 326-416)

Do you expect Bank Nifty to decisively break below its 56,600 support level next week?

The index has taken a pause post four months of a strong rally, indicating a breather before the next leg up move. The index is currently approaching key support of a rising trendline placed at 56,400. Only a decisive close below that will lead to an extended correction, else the index will consolidate in the broader range of 56,400-57,600. Further, one should note that in the upcoming week, major heavyweights’ banks will declare their Q1 earnings, which will dictate the next set of tone for the index.

Do you anticipate a major down move in the Nifty IT index following its consolidation breakdown this week?

The Nifty IT index staged a strong recovery from April low. Currently index faced stiff resistance from its 200-day EMA and closed below past 3-week lows. Consequently, current decline is bigger than the previous intermediate corrections seen during past three months up move which indicates pause in upward momentum which would lead to prolonged consolidation.

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