Market

Nifty to trade in 15,600-15,900 range this week, Bank Nifty remains positive; Infosys, Tata Steel top bets

Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy

By Rajesh Palviya

In the previous week Nifty opened with an upward gap and witnessed buying momentum in the initial half however profit booking at higher levels erased all the earlier gains which led the index to close in negative territory. Nifty closed at 15690 with a loss of 32 points on a weekly basis.

On the weekly chart the index has formed a small Bearish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction. For the past 3-4 weeks index is consolidating within 15900-15600 levels indicating short term consolidation. Hence any either side breakouts will indicate further direction. The chart pattern suggests that if Nifty crosses and sustains above 15800 level it would witness buying which would lead the index towards 15900-16300 levels. However if the index breaks below 15600 level it would witness selling which would take the index towards 15400-15300. Nifty is now well placed above its 50 and 100 SMA indicating positive bias in the short term. Nifty is expected to remain in an uptrend to sideways zone until it breaks 15600 on the downside. For the week, we expect Nifty to trade in the range of 15900-15600 with mixed bias.

The weekly strength indicator RSI and momentum oscillator Stochastic have both turned negative and are below their respective reference lines indicating negative bias

Nifty Derivative Outlook

Nifty in the current week has seen Short build Up with a marginal price cut of -19 points (-0.12%) and OI addition of 3.49lac shares(3.76%) increasing from 92.99Lac share to 96.48Lac shares. Nifty traded at a premium of 33 points compared to 19 points, while the sentiment indicator PC Ratio is currently trading at 0.94 which is below the median line and indicating neutral-to-positive bias. In Nifty the high OI on the CALL side in the weekly expiry scheduled 15th July is at 15,800(48.76L), 16,000(41.33L) & 15,700(46.84L) strike, with 16,200 & 15,800 acting as a strong resistance wherein there has been writing of 12.61Lac shares & 14.15Lac shares respectively.

The high OI on the PUT side is at 15,700(33.53L), 15,500(26.17L) & 15,600(29.55L) strike, with 15,600 & 15,400 acting as a strong support as there has been of writing of 13.91Lac shares & 9.59Lac shares respectively; while the pivotal level will be 15700 due high OI concentration on both the sides ie Call & Put wherein there has been addition of 33.27L & 16.82L shares on both the sides respectively. The tentative range for the current week is likely to be between 15,400 to 16,000. India Vix indicator of market volatility is currently at 12.94% Up by 7.05% on weekly basis but is still near the lowest levels since last 1 year indicating strong confidence and stability in current market trend and further descent from these levels will augment for more of an uptrend in the market.

Bank Nifty Outlook

In the previous week Bank Nifty opened with an upward gap and witnessed buying momentum in the initial half however profit booking at higher levels erased all the earlier gains which led the index to close on a flat note. Bank Nifty closed at 35072 with a gain of 262 points on a weekly basis.

On the weekly chart the index has formed a “Doji” candlestick formation indicating indecisiveness amongst market participants regarding the direction. For the past 6-7 weeks, index is consolidating within 36000-33900 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 35500 level it would witness buying which would lead the index towards 35800-36000 levels. However if the index breaks below 34600 level it would witness selling which would take the index towards 34200-33800.

Bank Nifty is trading above 50 and 100 day SMA’s which are important short term moving averages, 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 36000-34000 with mixed bias.

The weekly strength indicator RSI and momentum oscillator Stochastic have both turned negative and are below their respective reference lines indicating negative bias.

Bank Nifty Derivative Outlook

Bank Nifty in current week has seen Long Build Up with a price gain of 319 points (0.91%) and OI addition of 0.48lac shares (2.31%) increasing from 20.84Lac share to 21.33Lac shares and traded at premium of 198 points compared to 142 points. In Bank Nifty the high OI on the CALL side in the weekly expiry scheduled 15th July is at 36,000(13.74L), 35,500(12.10L) & 35,000(11.69L) strike, with 35,500 & 36,000 acting as a strong resistance wherein there has been writing of 5.00Lac shares & 4.03Lac shares respectively.

The high OI concentration on the PUT side is at 35,000(13.12L), 34,500(8.64L) & 34,000(6.08L) strike, with 34,500 & 34,900 acting as a strong support as there has been of writing of 3.47Lac shares & 2.82Lac shares respectively; while the important level to watch will be 35000 as there has been addition of 9.98L shares on Call side & 7.37L shares on Put side clearly indicating to be a decisive level for next week trend. The tentative range for the current week is likely to be between 34,000 to 36,500.

Sectors, stocks in focus this week

We expect the IT, Pharma & Healthcare, Chemical, FMCG and Metal sectors to show bullishness in coming trading sessions. One can focus on stocks like Infosys, Tech Mahindra, Mphasis, Divis Laboratories, Glenmark Pharma, Metropolis Healthcare, Deepak Nitrite, Dabur India, Tata Steel, Hindalco Industries, Bharat Forge, Bajaj Finance, Godrej Properties and Ambuja Cements 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.)

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