Technically, all the moving averages and momentum-based indicators are suggesting strong bullish momentum in Nifty 50, Sudeep Shah of SBI Securities said in an interview to Moneycontrol. However, he recommends adopting a cautious stance for next couple of trading sessions as index is likely to slide into a period of consolidation after a sharp upside rally.
According to him, the broader market may throw a surprise party as they are on the verge of a Bullish Flag pattern breakout.
Meanwhile, considering the current chart structure, the Bank Nifty index is likely to outperform frontline indices and test the level of 53,200, followed by 53,600 in the short-term, said the Deputy Vice-President and Head of the Technical and Derivative Research desk at SBI Securities, who has more than 15 years of experience in the technical research.
Nifty has been continuing its upside momentum. Do you feel Nifty could witness exhaustion at higher levels?
During the month of June, the benchmark index Nifty has witnessed high volatility as it has traded in nearly 2,900 points range, which was its highest since March 2020. Despite high volatility, the index has witnessed a strong upside rally of over 13 percent from the election result day’s low of 21,281 level. Since then, it has proceeded to mark a fresh all-time high and closed month above psychological level of 24,000 mark.
Impressively, the journey from the 23,000 to 24,000 mark has been the second fastest rally ever, with the index climbing 1,000 points in just 23 trading sessions. It has ended the week above 24,000 mark with a gain of over 2 percent. In the last five trading sessions, the major contribution was seen from index heavyweight stocks like Reliance Industries, HDFC Bank, ICICI Bank, Bharti Airtel and UltraTech Cement.
Technically, all the moving averages and momentum-based indicators are suggesting strong bullish momentum in index. However, we recommend to adopt a cautious stance for next couple of trading sessions as index is likely to slide into a period of consolidation after a sharp upside rally. The broader market may throw a surprise party as they are on the verge of a Bullish Flag pattern breakout. Hence, we recommend to look for stock specific opportunities in the next couple of trading sessions.
Talking about levels, the zone of 23,750-23,700 is likely to act as immediate support for the index. As long as the index is trading above 23,700 level, it is likely to continue its northward journey and test the level of 24,300, followed by 24,700 in short-term. While, any sustainable move below the level of 23,700 will lead to profit booking in index. In that case, the zone of 23,450-23,400 will act as next crucial support for the index.
What are rollovers for Nifty and Bank Nifty indicating?
It's worth highlighting that the Rollover for the Nifty Index futures was significantly higher at 76.25 percent compared to the previous month's 71.76 percent and the three-month average of 71.04 percent. Moreover, the rollover cost has witnessed minor dip to 0.24 percent as compared to the three-month average of 0.57 percent.
The rollover for Bank Nifty futures has slightly improved to 70.68 percent as compared to the previous month's 67.66 percent and the three-month average of 70.92 percent. Moreover, the rollover cost has also decreased to 0.30 percent, compared to the three-month average of 0.77 percent.
This clearly indicates that the market participants have roll over bullish positions.
What is your outlook on Bank Nifty for the current week, given the strong breakout in the past 2 weeks?
During June, the Bank Nifty has also witnessed high volatility as it has traded in range of over 7,100 points, which was highest since March 2020. Despite this high volatility, the index has strongly outperformed frontline indices and ended the month above 52,000 mark with the gain of over 7 percent. On monthly scale, it has formed bullish candle with long lower shadow, which is bullish sign.
Considering the current chart structure, the index is likely to outperform frontline indices and test the level of 53,200, followed by 53,600 in the short-term. On the downside, the zone of 52,000-51,900 is likely to provide cushion in case of any immediate decline.
Among the constituents of Bank Nifty, the ICICI Bank, Axis Bank, HDFC Bank and Federal Bank are looking good on weekly as well as daily chart.
How should traders’ approach the midcap and small cap space in the current week?
Despite ostrong upside rally in frontline indices, Nifty Midcap 100 and Nifty Small Cap 100 underperformed frontline indices. They are oscillating in narrow range since last couple of weeks. This resulted into the formation of Bullish Flag pattern on daily scale, which is considered as bullish continuation pattern.
Going ahead, the zone of 55,900-56,000 will be the crucial hurdle for Nifty Midcap 100 index. Any sustainable move above the level of 56,000 will lead to Bullish Flag pattern breakout. In that case, it is likely to test the level 56,700, followed by 57,300 in short-term. On the downside, the zone of 55,000-54,900 will act as immediate support for the index.
For Nifty Small Cap 100 index, the upper trendline of Bullish Flag pattern is placed in the zone of 18,400-18,450 level. Any sustainable move above the level of 18,450 will lead to sharp upside rally upto the level of 18,650, followed by 18,800 in short-term. While, on the downside, the zone of 18,100-18,050 will act as immediate support for the index.
Which sectors are expected to outperform in the short term?
We believe, Nifty Oil & Gas, Nifty IT and Nifty Pharma are likely to outperform in short-term.
On Friday, Nifty Oil & Gas has given consolidation breakout on daily scale. It is likely to continue its northward journey and test the level of 12,500 in short-term.
Nifty IT has given horizontal trendline breakout on daily scale. Going ahead, it is likely to test the level of 36,800, followed by 37,200 in short-term. On the downside, the zone of 35,700-35,600 is likely to provide cushion in case of any immediate decline.
On June 7, Nifty Pharma has given consolidation breakout and thereafter witnessed upside rally. However, after registering the high of 19,928, it has witnessed minor throwback. During the period of throwback, the index has re-tested the breakout level and resumed its northward journey. We believe, it is likely to test the level of 19,900, followed by 20,200 in short-term.
With a fresh move in largecap space, what are your top 2 picks?
As Nifty Oil & Gas has given fresh consolidation breakout. We believe, Reliance Industries is likely to outperform frontline indices. It has given 16-weeks consolidation breakout along with robust volume. It is likely to continue its northward journey and test the level of Rs 3,230, followed by Rs 3,300 in short-term. We recommend to maintain the stop-loss of Rs 3,050 level.
Nifty IT has given horizontal trendline breakout on daily scale. The stock of Persistent Systems is strongly outperforming the frontline indices. Also, it has outshone Nifty IT index by decent margin. We believe, it is likely to test the level of Rs 4,400 in short-term. Hence, we recommend to accumulate the stock at current market price with the stop-loss of Rs 4,150 level.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Disclaimer: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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