Fresh highs on the Nifty may be coming sooner than expected but 15,000-14,950 is likely to act as a strong hurdle, experts have said and that is what played out on April 29 morning as the index touched 15,000 but failed to hold on to it.
The index has rallied more than 5 percent from the swing low of 14,151 recorded on April 22 in just four trading sessions to reclaim the 50-day simple moving average (SMA) placed at 14,799.
Stable global cues, strong March quarter results from India Inc and expansion of the vaccination drive to include people above 18 years and the possibility of the second wave peaking in May-June helped the sentiment, experts say.
In a strategy report, brokerage firm CLSA said drawing parallels with the second wave in 12 nations, along with using various parameters, it expects daily cases to peak in Maharashtra in May and June for the rest of the country. Maharashtra is the worst-hit state in India, reporting the highest daily and active cases. The state, which accounts for at least 13 percent of India's GDP, has been reporting record deaths as well.
Also read: Coronavirus update: Record 3.79 lakh COVID-19 cases reported in India in single day, 3, 645 fatalities
If the momentum continues, the Nifty should be able to hit fresh record highs probably in May. Moving average convergence divergence (MACD), a trend-following momentum indicator, has given a bullish crossover, which suggests a positive outlook for the bulls.
“Market sentiment has been boosted by a set of strong results and continuing strong momentum in global markets, which has overshadowed concerns over economic activity arising from renewed lockdowns and the second wave of COVID-19 infections,” S Hariharan, Head-Sales Trading, Emkay Global Financial Services told Moneycontrol.
“Midcap outperformance, which is a theme that has been in play for the last six months, continues to play out. Barring any further widespread impact of COVID infections and resultant lockdowns in Tier 2 and Tier 3 cities, the Nifty can be expected to trade towards its life high in May.”
The earnings outcome of companies in the banking, IT, and auto space led the up move, which helped to boost investor’s confidence.
Technically, the Nifty closed above short as well as medium-term moving averages. The rally in the past four sessions has pushed the support for the index towards 14,600.
F&O expiry on April 29, as well as US Federal Reserve outcome, will fuel some volatility but looking at the OI concentration, experts see the expiry between 14,800 and 14,860 levels. The big resistance is placed at 15,000, and a break above the level could see the index hitting record highs in the near term.
On the options front, maximum Put OI is placed at 14,000 followed by 14,500 strikes, while the maximum Call OI is placed at 15,000 followed by 15,200 strikes.
Call writing is seen at 15,100 then 15,050 strikes, while Put writing is seen at 14,700 and 14,800 strikes.
“The index has given closing above 21-day moving averages, which suggests strength in the index. Additionally, the MACD indicator is trading with a positive crossover, which suggests a positive rhythm in the counter. At present, the support has shifted to 14,600 levels, while an upside resistance seems at 15,000 levels,” Sumeet Bagadia, Executive Director at Choice Broking told Moneycontrol.
“Based on the derivatives data, the maximum OI buildup has been noticed in the range of 14,700 to 15,000 levels. Technically, the index may find the resistance at around 14,950 level, which is a 61.8 percent retracement level of its prior trend. Hence, we are expecting the monthly expiry between the range of 14,800 to 14,860 levels,” he said.
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