Q) Sensex, Nifty bounced back sharply this week from lows to reclaim crucial resistance levels with strong gains. There was mild profit booking and a cautious approach on Friday. What led to the price action?
A) The benchmark index had crucial support placed at 14,000 levels, and a break below this level could take the index towards 13,800-13,700 levels.
Positive results from major stocks like TCS, Infosys, Wipro, HDFC Bank & ICICI Bank added hope to grow and created a buy-side for the market saving it from a further major fall. Friday’s session saw profit bookings.
The credit growth touched a record low of 5.6 percent in the financial year 2021, which had been updated by the Reserve Bank of India, hurting the Indian Economy.
The Index closed above the 15-Days Moving Average and the True Strength Indicator having positive crossover signals an upside move.
A correction can be seen up to the nearby support zone of 14450 levels from where a bounce back to the levels of 15000 can be expected.
The Nifty has resistance near 15000 levels, and a breakout above that can shoot the index to an upside target of 15,200-15,300 levels.
Q) What is your outlook on the May series looking at the rollover data, as well as Open interest etc.? Where do you see the Nifty50 moving in May series?
A) The April series was full of roller coaster rides for the trades as the market initially started with a positive bias, but due to the rise in COVID-19 cases all over the country, some pressure was seen at higher levels.
During the April month, Nifty touched a low of 14151.40 levels on 22nd April’21 and from there again it bounced back towards 15000 levels on 29th April’2.
Nifty & BankNifty rollovers were both on the lower side. The Nifty witnessed a rollover of 66.28%, compared to the 3-Month averages of 79.6% and a 6-month average of 78.21 while BankNifty has suggested a rollover of 64.60%, compared to a 3-Month average of 80.16% and 6-months averages of 78.6%.
On the options front, the highest open interest (OI) is placed at 14000 strikes put options followed by 13800 PE. While on the call side, 15000 CE has the highest open interest followed by 15500 strike prices.
On the sector front, maximum rollover has been noticed in the Telecom sector with 87.51% vs 55.96% while FMCG has witnessed a reduction by 75.90% vs 96.63%.
Based on the above data, we are cautious in the market for the month ahead. On the higher side, 14,900/15,000 is the strong resistance while on the downside 14,000/13,800 is the strong support for the Nifty index.
Q) In terms of sectors, Metals, banks led the rally in the week gone by. What is fuelling the price action in these sectors?
A) On the metal front, the rally was driven by the improving demand conditions globally and certain supply constraints in China, basically due to the restriction on polluting sectors and the removal of VAT rebate on exports of steel products.
The china news had a positive impact on the international steel prices and also on the domestic steel prices. Currently, domestic steel prices are at a discount to import parity and fewer exports from China, which implies domestic players now have more room for a price hike.
With improved steel price and spread, the optimism among the steel companies are likely to continue in 2021. Over the last week, we have seen a sharp up move in the banking index.
The up-move was driven by better-than-expected results by large banks like HDFC Bank, ICICI Bank and Axis Bank. Though the rally remained constrained to large banks amid optimism over high COVID-19 provisioning, capability to face second COVID-19 uncertainty, and gaining of market share because of reduced competition.
Alternatively, small banks’ shares remained under pressure due to their comparatively weaker financial condition to deal with concerns over pandemic-led uncertainty. We view the second wave of Covid-19 to create near-term business challenges for the banking industry.
Q) Small & Midcaps performed in line while Small Cap might have outperformed. What is driving the price action in these stocks?
A) Traditionally, large-caps tend to outshine small-and-mid-caps during market correction as investors believe that big companies are a better place for safe return.
However, this time things are very different, as the Nifty index has been trading down almost 800 points from its lifetime high, but the Nifty Small Cap index is trading at its lifetime high.
One reason could be that the medium and smaller companies have also been reporting better results than some of their large-cap counterparts, and this, in turn, is making institutional investors evaluate their potential in a new light.
On the technical front, the Nifty Small-cap is forming a Pennant pattern, which is a continuation pattern that suggests an upside rally. On the weekly chart, the index has formed Open Bullish Marabozu, which suggests bullishness in the counter.
A) Here is a list of top trading ideas for the May series:
Glenmark Pharma: Buy| LTP: Rs 576| Target: Rs 640| Stop Loss: Rs 530| Upside 11%
On the daily chart, the stock has tested the neckline of the Flag Pattern and gave a closing above it, which suggests that the upside movement in the counter is still intact.
Furthermore, the stock has been trading above its 21-Days Exponential Moving Average, which indicates that the stock can accelerate further.
On the weekly chart, the stock has given a breakout from its "Upper Band of Bollinger band" which suggests an upside movement with high volatility in the counter.
The momentum indicator RSI and MACD both have shown positive crossover on the daily chart, which adds more bullishness to the price.
Mahanagar Gas Ltd: Buy| LTP: Rs 1125| Target: Rs 1230| Stop Loss: Rs 1060| Upside 9%
On the daily chart, the stock has given a breakout from the falling wedge pattern which suggests a bull-run in the Index.
Furthermore, the stock has taken a support at 1060 level which is a 61.80% Retracement level of its previous up move from 960 to 1245 level which shows an upside movement in the counter.
Moreover, the stock has given closing above 100 DMA, which shows a positive trend for the time being.
Eicher Motors: Buy| LTP: Rs 2421| Target: Rs 2580| Stop Loss: Rs 2340| Upside 10%
On the daily chart, the stock has taken support from the horizontal line as well as 38.2% Fibonacci retracement, which suggests a bull-run in upcoming days.
Furthermore, the stock has given closing above 200-DMA, which suggests a positive move in the counter. Additionally, the momentum indicator MACD has given a positive crossover and is about to give closing above the zero-level line, which adds bullishness in the price.
Disclaimer: The views and investment tips expressed by 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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
