India VIX, the fear index, has rising significantly in the past few sessions (from 10.93 to 20.53 levels). But, "a rising VIX on its own, particularly during the current election period, may not necessarily lead to a sharp correction in the Indian markets," Sudeep Shah of SBI Securities said.
According to him, the significant trouble is more likely if a rising VIX coincides with weakness in global markets.
Technical factors indicate strong bullish momentum in Balkrishna Industries, and Zydus Lifesciences, said the deputy vice-president and head of the technical and derivative research desk at SBI Securities, who has more than 15 years in technical and derivatives research.
Do you get the confirmation for Nifty moving towards record high in coming days, though the volatility remains elevated at around 20?
Over the past week, the Nifty has shown significant volatility, with the India VIX rising to the 20-21 range and potentially climbing higher. Historically, since 2011, there have been nine instances when the India VIX traded between 20 and 40. In six of those instances, the Nifty corrected by 10-15 percent, while in the remaining three, it gained by 12-20 percent. Notably, two of the three instances where the index gained despite a rising VIX occurred during the election periods of 2014 and 2019, coinciding with positive momentum in global markets.
Therefore, a rising VIX on its own, particularly during the current election period, may not necessarily lead to a sharp correction in the Indian markets. Significant trouble is more likely if a rising VIX coincides with weakness in global markets.
Coming to the Nifty, post a retest of 21,825 zone, index has shifted gears and started its rebound journey, finally ending the week (ended May 18) above 22,500 mark with the gain of over 2 percent. On a weekly scale, it has formed sizeable bullish candle.
Currently, the index is trading above its short and long-term moving averages. The daily RSI (relative strength index) has given a breakout of a Falling Wedge pattern and is about to cross the 60 mark, indicating strengthening momentum. Additionally, all the other indicators and oscillators indicate strength, and hence, we expect the current positive momentum to continue.
Going ahead, the 20-day EMA (exponential moving average) zone of 22,300-22,200 will serve as crucial support for the index as the index has sustained above it for the past 3 sessions amidst high volatility. As long as the index trades above this support zone, it is likely to continue its upward movement towards the 22,800-22,850 zone, which is the upper trendline of rising channel. A sustained move beyond 22,850 could ignite a significant upside rally in the index upto the levels of 23,200.
Also, do you see Bank Nifty surpassing 49,000 mark in the current week?
Since the last couple of trading sessions, the Bank Nifty has oscillated near the lower trendline (Demand Line) of rising channel. Further, since the last couple of trading sessions, it has formed candles with long lower shadows on a daily scale, indicating buying interest at lower levels.
While the index is placed above 20 & 50-day EMA currently, going ahead, the zone of 48,450-48,500 will act as immediate resistance for the index. Any sustainable move above the level of 48,500 will lead to sharp upside rally upto the level of 49,000, followed by 49,500 in the short term. While, on the downside, the zone of 47,700-47,750 will act as crucial support for the index as 50-day EMA is placed in that region, and it coincides with lower trendline of rising channel.
Are the charts giving you a strong confirmation about Balkrishna Industries' sharp northward journey?
The stock of Balkrishna Industries has given Stage-2 Cup pattern breakout on a weekly scale backed by robust volume. In addition, it has formed sizeable bullish candle on breakout week, which adds strength to the breakout.
The momentum indicators and oscillators also support the overall bullish chart structure.
In a nutshell, the stock has registered a bullish pattern breakout along with volume confirmation. As per the major rule of Cup pattern. The upside target is placed at Rs 3,100, followed by Rs 3,350 in short-term. While, on the downside, Rs 2,600-2,570 zone is likely to offer strong support.
Do you see a big rally in Zydus Lifesciences given the trendline breakout?
The stock of Zydus Lifesciences is outperforming the frontline indices and notably outpacing the Nifty Pharma index, exhibiting significant strength. The ratio chart comparing Zydus Lifesciences to Nifty Pharma has reached a fresh all-time high, indicating a strong relative performance.
On a daily scale, the stock has given a horizontal trendline breakout, which is confirmed by the above 50-day average volume. The momentum indicators and oscillators also support the overall bullish chart structure.
These technical factors indicate strong bullish momentum in stock. On the upside, it is likely to test the level of Rs 1,200-1,240 in the short term. While, on the downside, the zone of Rs 1,040-1,030 will act as immediate support for the stock.
Do you think the journey in Nifty Midcap and Smallcap indices remain unstoppable?
Despite high volatility in frontline indices, the broader market indices have strongly outperformed frontline indices. Most noteworthy, the Nifty Midcap 100 index has reached a fresh all-time high, while the Nifty SmallCap 100 is just a stone's throw away from its all-time high. We believe this outperformance is likely to continue over the next few weeks.
The ratio chart of the Nifty Midcap index, when compared to the Nifty index, is at all-time high, displaying strong outperformance. Going ahead, the Nifty Midcap index is likely to continue its positive momentum upto 52,400, followed by 53,000 in the short term. While on the downside, the zone of 51,300-51,200 is likely to act as an immediate support.
For the Nifty Smallcap index, the zone of 17,100-17,150 will act as a minor hurdle. Any sustainable move above the level of 17,150 will lead to horizontal trendline breakout on a daily scale upto the levels of 17,400-17,600 in the short term. On the downside, 16,750-16,700 zone will act as crucial support for the Nifty Smallcap index.
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