Nifty Uptrend To Continue Next Week, Say Analysts

The Nifty 50 is expected to show an uptrend next week after rising for two straight weeks, according to two analysts BQ Prime spoke with.

If the benchmark sustains above 18,450 and 18,500-18,550 range, Gaurav Bissa of InCred Captial and Sudeep Shah of SBI Securities expect the rally to continue towards 19,000.

Bank Nifty momentum is likely to remain positive, they said.

Both Sensex and Nifty 50 on Friday snapped their eight-day gaining streak to close at 62,868.50 and 18,696.10, respectively. The benchmark indices hit their all-time highs this week, on Wednesday, with the Sensex scaling 63,583.07 and the Nifty 50 hitting 18,887.60.

The S&P BSE Sensex gained as much as 0.92% this week, whereas the Nifty 50 rose 0.99%.

Here's what analysts expect next week:

Gaurav Bissa, vice president, InCred Capital

The coming week would be interesting for benchmark indices, according to Bissa, as Bank Nifty has not only outperformed the Nifty 50 but also lent support whenever the index came under pressure.

In the early part of the week, Nifty remained strong crossing previous lifetime highs. Though there was profit booking toward the end of the trading week, the benchmark managed to close above the previous record high levels.

While the open interest in Bank Nifty reduced by 5%, Nifty witnessed open interest addition of 15%, signalling that the uptrend is expected to continue in Nifty. The key levels to watch for Nifty would be 18,500-18,550, which if sustained can push it back to 19,000 levels. Even though Bank Nifty has failed to show strong data, technically it remains positive till it holds 42,800 levels.

Nifty Metals and Nifty IT witnessed strong upside throughout the week, led by midcap IT stocks. The index has been outperforming for the last few weeks with fresh breakout seen on the daily charts. Expect the index to consolidate after the strong rally, however, the view remains positive in the medium term.

Nifty Metal index closed within the striking distance of making fresh life-high. Stocks like Jindal Steel Ltd, Hindalco Industries Ltd., and Tata Steel Ltd. witnessed considerable upside, with more expected before consolidation kicks in.

Stocks such as United Breweries Ltd. and Gujarat Gas Ltd. have witnessed strong 'open interest' addition along with positive price action. UBL is forming cup-and-handle formation on daily charts, and thus may witness a strong upside if it sustains Rs 1,750 level, whereas Gujarat Gas is trading in a strong triangle pattern.

Strategy

• Buy UBL Above Rs 1,750 for a target of Rs 1,825; Maintain stop-loss at Rs 1,700.

• Buy Gujarat Gas for a target of Rs 550 and maintain stop-loss at Rs 495

Duration: Two Weeks

Sudeep Shah, head-technical and derivative research, SBI Securities 

Global markets continued their positive momentum, backed by dovish comments by U.S. Federal Reserve chairperson Jerome Powell hinting at a slower pace of future rate hikes, pulling the dollar index below 105 levels and the yield on the U.S. 10-year Treasury note to 3.6%.

That helped the Nifty 50 register a fresh all-time high of 18,887.6 on the back of strong broad-based buying witnessed in cement, metal, oil & gas, FMCG, and the IT Index. Despite minor profit taking on Friday, the index ended the week with a 1% gain.

After eight consecutive days of gains, the index could witness consolidation for a few more sessions next week ahead of the RBI policy and Gujarat election results.

The volatility index, India VIX, has also slipped to its lowest level since September 2021 at 13.4, indicating that the volatility is gradually subsiding and providing comfort to the bulls. While a lower VIX might reduce trading opportunities in indices due to lower volatility, it will lead to a lot of sector rotation and thus offers a opportunities to make money in stock-specific trading and investing.

There is strong support for the Nifty 50 at 18,450–18,500 as indicated by chart patterns in the 13 exponential moving average, or 13 EMA, zone. The rally will continue towards 18,850-18,900 till the index sustains above 18,450 level. The trend firmly remains 'Buy-on-Dips'. However, if the index slips below 18,450, weakness could persist up to 18,250–18,180.

Options data suggests a broader trading range of 18,450–18,850 for the upcoming week, with significant call-writing witnessed in 18,800–19,000 calls and aggressive put writing in 18,700–18,600 strikes, leading the index to find support at 18,450–18,500.

With VIX on decline, the view remains bullish until the Nifty holds the 18,450 level. Traders and investors should adopt a stock specific approach and look to add quality stocks that are currently outperforming the markets. 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 the banking sector to take a pause, with stocks from the cement, IT (midcap), oil & gas, FMCG, and metal sectors outperforming going ahead.

There is a positive trade-set-up visible in select large-cap names such as Reliance Industries Ltd., Tata Steel Ltd., JSW Steel Ltd., Grasim Industries Ltd, Dabur India Ltd., Axis Bank Ltd., and ACC Ltd.

On the mid-cap front, stocks like Aditya Birla Capital Ltd., Mahindra and Mahindra Financial Services Ltd., United Breweries Ltd., L&T Technology Services Ltd, Coforge Ltd., Cummins India Ltd., Apollo Tyres Ltd., Deepak Nitrite Ltd, DLF Ltd. and Polycab India Ltd. could continue to witness strong buying interest in the coming week.

Domestic markets witnessed some selling pressure and snapped an eight-day winning streak. Broader markets, however, outperformed benchmark indices in trade. After rallying 4%, the market seems to have taken a pause and is showing signs of consolidation.

Next week, markets will watch for cues from the RBI's monetary policy and the outcome of the Gujarat state elections.