By Rajesh Palviya
Nifty opened with an upward gap and selling pressure in the first half dragged the index on Friday. However some buying support along at lower levels recovered some of the earlier losses to close on a flat note. The daily price action has formed a bearish candle carrying lower shadow indicating buying support at lower levels. The Nifty closed at 14681 with a loss of 19 points (-0.13%)
On the weekly chart index has formed a bearish candle forming higher High-Low formation indicating positive bias. Since the past 8-9 weeks, the index has been consolidating within a broad range of 15000-14200 levels representing short term sideways trend. The chart pattern suggests that if Nifty crosses and sustains above 14800 level it would witness buying which would lead the index towards 15000-15250 levels. Important Support for the week is around 14400-14200. Nifty is now well placed above its 100 SMA indicating positive bias in the short term. Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Nifty to trade in the range of 15000-14400 with mixed bias. IndiaVix is currently at 20.27 % and has been in a downward trajectory from its recent high of 24.54% suggesting confidence and stability in current market trend and further descend from these levels will augment for more of an uptrend in market.
The weekly strength indicator RSI is moving downwards and is quoting below its reference line indicating negative bias. However momentum oscillator Stochastic has turned positive from the oversold zone indicating a possible consolidation or a up-move in the near term
Nifty derivative outlook
Nifty in current expiry has seen Short build up with a price cut of -1.46% and OI addition of 21 lac shares increasing from 102.38 Lac share to 123.24 Lac shares . The sentiment indicator PC Ratio is currently trading at 1.11 above the median line but still in a comfortable zone indicating positive bias. In Nifty the high OI on the CALL side in the weekly expiry scheduled 20th May is at 14,900, 15,000 & 15,300 strike, with 14,900 & 15,000 acting as a strong resistance wherein there has been writing of 16.13Lac shares & 16.80 Lac shares respectively. The high OI on the PUT side is at 14,500 -14,600 & 14,700 strike, with 14,600 & 14,400 acting as a strong support as there has been of writing of 12.20Lac shares & 10 Lac shares respectively. The tentative range for the current week is likely to be between 14,400 to 15,000. Fiis compared to last week have reduced their Future Index Long position by 8,545 contracts & have increased their Future Index Short by 15,964 contracts compared to
Bank Nifty outlook
Bank Nifty started the week on a flat note and remained negative throughout the week. Bank Nifty closed at 32170 with a loss of 735 points on a weekly basis.
On the weekly chart index has formed a bearish candle and has remained restricted within previous week’s High-Low range which signals indecision at current levels. Since the past couple of weeks, the index has been consolidating within 34000-31800 levels indicating short term consolidation. Hence any either side breakouts will indicate further direction. The chart pattern suggests that if Bank Nifty crosses and sustains above 33000 level it would witness buying which would lead the index towards 33500-34500 levels. However if the index breaks below 31900 level it would witness selling which would take the index towards 31500-30700. Bank Nifty is trading below 20, 50, and 100 day SMAs which are important short term moving averages, indicating negative bias in the short to medium term. Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Bank Nifty to trade in the range of 33500-31500 with mixed bias.
The weekly strength indicator RSI is moving downwards and is quoting below its reference line indicating negative bias. However, momentum oscillator Stochastic has turned positive from the oversold zone indicating a possible consolidation or an up-move in the near term.
Bank Nifty derivative outlook
Banknifty also saw Short build up with price cut of -4.56% & OI addition of 2.36 lac shares increasing from 13.97 Lac to 16.34 Lac shares. In BankNifty the highest OI on the CALL side in the weekly expiry is at 32,500 -33,000 & 34,000 strike, with 33,000 acting as a strong resistance zone wherein there has been writing of 5.13Lac shares, while on the PUT side highest OI is at 31,500 – 31,000 & 30,000 strike, with 32,500 acting as a pivotal level for this weekly expiry as there has been addition of 7.46Lac shares on CALL side & 2.54 Lac addition on PUT side suggesting that any sustain move on either side of this level (32,500) will decide the trend in Banknifty.
Sectors and stocks to watch this week
We expect the IT, Pharma, FMCG, Fertiliser and Consumer durable sector to do well in the near term. One can focus on stocks like Cipla, Lupin, PI Industries, Bata India, Wipro, Asian Paints, Pidilite Industries, Voltas for near term bullish trend. Midcap space also looks attractive and we expect stocks like Great Eastern Shipping Co Ltd, Welspun India, Eris Lifesciences, Gujarat State Fertilizers Chemicals (GSFC) are likely to do well in the near term.
(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)