By Dharmesh Shah
Nifty Outlook: Equity benchmarks extended their record-setting spree more than the second consecutive week, as Nifty scaled to new highs of 15733 in the preceding week. Nifty settled the week at 15670, up 1.5%. Broader marketplace reasonably outperformed as Nifty midcap and little cap gained 3.3% and 2.4%, respectively. Sectorally, barring IT, all other indices ended in green led by auto, metal, PSE and realty
Nifty technical outlook
– The Nifty began the week on a firm note and progressively resolved greater toward our earmarked target of 15700. The weekly value action formed a powerful bull candle carrying greater higher-low, signifying acceleration of upward momentum. Key point to highlight in the course of the week is that, the India VIX (which gauge the marketplace sentiment) has declined to six-month lows ~14, indicating subsiding anxiousness connected to COVID implication.
– The comply with by way of strength post more quickly pace of retracement (previous 10 weeks decline totally retraced in just 5 week) backed by enhancing marketplace breadth signifies robust value structure that tends to make us think Nifty will at some point resolve above 15700 mark and extend the rally towards our revised target of 16100 in June 2021. However, we think a move toward 16100 would be nonlinear in nature as round of short-term breather following the 1,150 points rally (seen more than previous 3 weeks) can not be ruled out. Therefore, any dip from hereon must be capitalised as incremental getting chance as we do not anticipate index to breach the powerful help of 15200 levels. Our extended target of 16100 is based on following observations:
a) Price parity of post price range rally (13597-15432), projected from April low of 14151, placed at 16055
B) Past two months consolidation (15140-14150) breakout target is placed at 16120
– Sectorally, BFSI, Auto, IT, Consumption and Infra to lead the rally
– On the stock front, we choose Infosys, Reliance Industries Ltd, Bajaj Finance, Kotak Mahindra Bank, Adani Ports and Special Economic Zone, Titan Company, GAIL in huge cap, although Escorts, Ashok Leyland, Trent, JK Tyres, Voltas, Container Corporation of India (Concor), Hindustan Zinc, Thermax, L&T Infotech, Mahindra Life, Nocil are preferred midcap picks
– Broader marketplace indices reasonably outperformed the benchmark as Nifty midcap and little cap indices scaled to a fresh 52 weeks higher. The outperformance in the broader marketplace indices has been backed by enhancing marketplace breadth as at the moment ~87% of index elements are trading above their 50 days EMA compared to April reading of ~60%. We anticipate, little cap index to challenge the all-time higher which is just 2% away
– Structurally, the formation of greater higher-low backed by rejuvenation of marketplace breadth signifies inherent strength that tends to make us confident to revise help base at 15200 as it is confluence of:
a) 61.8% retracement of previous 3 week’s rally (14885-15733), at 15209
b) previous two week’s low is placed at 15145
Bank Nifty outlook
– The index gained for the third consecutive week as it traded in a variety with positive bias. The weekly value action formed a higher wave candle carrying greater higher-low, indicating continuance of positive bias amid stock precise action
– Going forward, we reiterate our positive stance with target of 36200 in coming weeks as it is the confluence of the 80% retracement of the whole last 3 months corrective decline (37708-30405) and the value parity with preceding up move (30405-34287) as projected from the current trough of 32115 signalling upside towards 36200 levels
– Key observation is that the index has gained for third consecutive week for the initially time in the whole corrective decline of the last 3 months highlighting enhancing value structure
– The index has witnessed a sharp rally of more than 11% in just 15 sessions, which has led to weakly stochastic at overbought territory with a reading of 92. Hence, a short-term breather at greater levels can not be ruled out. – However, we think such a breather must not be seen as unfavorable alternatively it must be capitalised to accumulate top quality banking stocks for up move towards 36200 in the coming weeks
– The formation of greater higher-low on the weekly chart signifies elevated getting demand that tends to make us confident to revise the help base greater towards 34400-34000 levels as it is confluence of:
a. The 38.2% retracement of the present up move (32115-35810) placed at 34400
b. The current breakout location and the April higher (34287).
c. The increasing 50 days EMA placed at 33900 levels
(Dharmesh Shah is the Head – Technical at ICICI Direct. Please seek advice from your monetary advisor just before investing.)
ICICI Securities Limited is a SEBI registered Research Analyst obtaining registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/advantageous ownership of 1% or more securities of the topic organization, at the finish of 22/04/2021 or have no other monetary interest and do not have any material conflict of interest. I-Sec or its associates could possibly have received any compensation towards merchant banking/ broking services from the topic corporations described as customers in preceding 12 months