Nifty To Bounce Back To 18,700-18,750 If Key Support Level Holds, Say Analysts
With volatility on a decline, analysts BQ Prime spoke with remain bullish on Nifty 50 in the medium term.
Nifty is expected to bounce back towards 18,700-18,750 if it manages to hold above 18,300 next week, according to two analysts BQ Prime spoke with.
With volatility on a decline, Sudeep Shah of SBI Securities and Ashish Chaturmohta of JM Financial remain bullish on the Nifty 50 in the medium term.
The S&P BSE Sensex and NSE Nifty 50 snapped two-week gaining streak to end lower this week. On Friday, the benchmarks surrendered early gains after selloff in IT, technology and energy stocks. Foreign investors remained sellers for the fifth straight day.
The Sensex closed 389 points or 0.62% lower at 62,181.67 points, while the NSE Nifty 50 fell 113 points or 0.61% lower to end at 18,496.60 points.
Here's what analysts expect next week:
Charts Indicate Support At 18,320-18,350
Sudeep Shah, head-technical and derivative research, SBI Securities
Despite a further cool-off in the Dollar Index below 105 levels and U.S. 10-year yields to 3.45%, global markets witnessed profit booking from higher levels due to the uncertainty ahead of Fed Policy scheduled next week.
After a vertical rise in the past month in Nifty, the index has taken a breather and witnessed consolidation throughout the week. Sector rotation was visible with strong broad-based buying in cement, metal, FMCG as well as banking and financial index, which hit a fresh all-time high on the back of declining crude prices.
The Volatility Index, India VIX, is at its lowest levels since September 2021 at 13.5, indicating that the volatility is gradually subsiding and providing comfort to the bulls.
Lower VIX is leading to increased stability, which has led to broader market participation and offers a lot of opportunities to make money in stock-specific trading and investing.
Chart patterns suggest 18,320-18,350 zone will act as a strong support for Nifty 50. Till the index sustains above the level of 18,320, we may witness rebound up to the level of 18,700-18,730, followed by 18,950 levels.
However, if the index slips below 18,320, weakness could persist up to 18,170-18,100. Options data suggests a broader trading range of 18,320-18,700 for the upcoming week with significant call writing witnessed in 18,600-18,700 and aggressive put writing in 18,600-18,500-18,400 strikes. That could lead to the index finding support at 18,320-18,350.
Traders and investors should adopt a stock specific approach, and should look to add quality stocks currently outperforming the markets. With interest rate cycle on an upward trajectory, one should prefer quality large caps and high-quality mid caps while staying away from small caps, especially the debt-ridden ones.
Based on the derivative open interest data and chart set-up, we expect stocks from the cement, capital goods, FMCG, banking and metal sectors to outperform. Positive trade-set-up is visible in select large caps such as Axis Bank Ltd., HDFC Bank Ltd., Hindustan Unilever Ltd., Larsen & Toubro Ltd. and ACC Ltd. On the mid-cap front, stocks like Au Small Bank Ltd., Colgate-Palmolive India Ltd., Multi Commodity Exchange of India Ltd., United Spirits Ltd. and Polycab India Ltd. could continue to witness strong buying interest in the coming week.
Short build-up was witnessed in stocks from IT, pharma and auto sectors which can lead to selling pressure at higher levels
If the index holds above the 18,400 levels, we can expect bounce back towards 18,700-18,750.
Expect Profit Booking To Continue Below 18,400
Ashish Chaturmohta, director, head of equity advisory research at JM Financial
Nifty is seeing some profit booking and corrected from all-time high of 18,888 to 18,497. It has retraced back below last year high of 18,604. In the last session, we saw some bounce back from 18,410, which was around its minor swing high. India VIX, a measure of volatility, has stabilised around 13.35 levels. VIX holding above 13.35 will cap gains on the upside. On the downside, if trading below 18,400, expect profit taking to continue towards 18,150 levels.
The financial sector continues to exhibit strength led by public sector banks and NBFCs, which saw significant open interest addition last week; while private banks went into a consolidation mode. We can expect private lenders like HDFC Bank, ICICI Bank Ltd., Axis Bank Ltd. and State Bank of India to lead. Cholamandalam Investment and Finance Co. looks promising at current levels.
FMCG has shown outperformance this week with HUL and Colgate-Palmolive seeing open interest addition and poised for breakout. We also like Nestle Ltd., United Breweries Ltd and ITC Ltd. in the sector.
IT was the key drag last week and saw shorts being created in stocks like HCL Technologies Ltd., Tech Mahindra Ltd., Infosys Ltd..