By Rajesh Palviya
Nifty started the week on a flat note however buying momentum throughout the week led the index to end on a positive note. Nifty closed at 15923 with a gain of 234 points on a weekly basis. On the weekly chart the index has formed a small Bullish candle carrying lower shadow indicating buying support at lower levels.Since the past 5-6 weeks, the index has been consolidating within a broad range of 15900-15500 levels representing a short term sideways trend.
The chart pattern suggests that if Nifty crosses and sustains above 15950 level it would witness buying which would lead the index towards 16100-16300 levels. However if the index breaks below 15800 level it would witness selling which would take the index towards 15700-15600. Nifty is trading above the 20 and 50 day SMA which is an important short term moving average, 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 16300-15800 with a positive bias.
The weekly strength indicator RSI is in bullish mode and sustaining above its reference lines indicating positive bias
Nifty Derivative Outlook
Nifty in the current week has seen Short Covering with a price gain of 214 points (1.36%) and OI shedding of 1.91lac shares(-1.98%) decreasing from 96.48Lac share to 94.57Lac shares. Nifty traded at a premium of 13 points compared to 33 points, while the sentiment indicator PC Ratio is currently trading at 1.24 which is above the median line but in a comfortable zone indicating positive bias. In Nifty the high OI on the CALL side in the weekly expiry scheduled 22nd July is at 16,000(40.05L), 16,200(32.73L) & 16,100(25.41L) strike, with 16,000 & 16,200 acting as a strong resistance wherein there has been writing of 19.60Lac shares & 9.88Lac shares respectively.
The high OI on the PUT side is at 15,900(34.36L), 15,800(30.51L) & 15,700(26.51L) strike, with 15,900 & 15,700 acting as a strong support as there has been of writing of 9.88Lac shares & 9.70Lac shares respectively; so important levels to watch for will be 16000 and 15900; wherein if Nifty sustains above 16000 can move till 16200 while on the other side if sustains below 15900 can test 15700 levels. The tentative range for the current week is likely to be between 15,700 to 16,200. IndiaVix indicator of market volatility is currently at 11.70% down by 9.56% on a weekly basis near the lowest levels since last 1 year indicating strong conviction and stability in current market trend and further descend from these levels will augment for more of an uptrend in the market.
Bank Nifty Outlook
Bank Nifty started the week on a flat note and buying momentum for most part of the week led it to close in positive terrain. Bank Nifty closed at 35752 with a gain of 680 points on a weekly basis. On the weekly chart the index has formed a small Bullish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction. Since the past 6-8 weeks, index is consolidating within 36000-34000 levels indicating short term consolidation. Hence any either side breakout will indicate further direction.
The chart pattern suggests that if Bank Nifty crosses and sustains above 36000 level it would witness buying which would lead the index towards 36500-37200 levels. However if the index breaks below 35400 level it would witness selling which would take the index towards 35000-34600. Bank Nifty is trading above 20, 50 and 100 day SMAs which is an important short term moving average, indicating positive bias in the short 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 37200-35400 with a positive bias.
The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.
Bank Nifty Derivative outlook
Bank Nifty in current week has seen Short Covering with a price gain of 586 points (1.66%) and OI shedding of 0.67lac shares (-3.13%) decreasing from 21.33Lac share to 20.66Lac shares and traded at premium of 105 points compared to 198 points. In Bank Nifty the high OI on the CALL side in the weekly expiry scheduled 22nd July is at 36,000(16.71L), 36,500(10.84L) & 35,500(10.52L) strike, with 36,000 & 36,500 acting as a strong resistance wherein there has been writing of 8.95Lac shares & 4.22Lac shares respectively.
The high OI concentration on the PUT side is at 35,500(14.47L), 35,000(8.66L) & 35,800(6.07L) strike, with 35,500 & 35,000 acting as a strong support as there has been of writing of 7.11Lac shares & 3.83Lac shares respectively; while the important level to watch will be 35800 as there has been addition of 6.95L shares on Call side & 2.75L shares on Put side clearly indicating to be a decisive level for next week trend followed by 35500. The tentative range for the current week is likely to be between 35,000 to 36,500.
Sectors, stocks in focus this week
We believe the IT, Pharma & Healthcare, Metal, Power and Realty sectors can do well in the near term. One can focus on stocks like Lupin, Glenmark Pharma, Infosys, Tech Mahindra, Tata Steel, Hindalco Industries, Ushamartin, DLF, Indiabulls Real Estate, Prestige Estates Projects, Pidilite Industries, Bata India, Deepak Nitrite can do well in 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.)