Nifty to extend ongoing rally towards 18000 going ahead, use dips for buying; RIL, SBI top making bets

Nifty to extend ongoing rally towards 18000 going ahead, use dips for buying; RIL, SBI top making bets

By Dharmesh Shah

On expected lines, the Nifty 50 index resolved higher and approached our earmarked target of 17300. The weekly price action formed a strong bull candle carrying higher high-low, indicating continuance of positive bias. Key point to highlight is that the index has closed above its previous week’s high after 8 weeks’ corrective phase, indicating a pause in downward momentum. As a result, index retraced 61.8% of January-March decline (18350-15671), placed at 17300, in line with past two occasions, since October 2021.

Over the past three weeks broader market indices have undergone healthy consolidation above the 52 weeks EMA that has set the stage to witness catch up activity with its large cap peers in coming weeks. Thus, focus should be on accumulating quality midcap stocks.

Structurally, IT, Capital goods and Metal to outperform while beaten down Realty, Consumer discretionary, BFSI and Auto would offer stock specific opportunities. Our preferred large cap picks are Infosys, SBI (State Bank of India), Reliance Industries Ltd (RIL), Titan Company, DLF Ltd, Tata Steel, while in midcaps we like Mindtree, Aditya Birla Fashion and Retail, Amber Enterprises, Havells, Bank of Baroda, Orient Hotel, Hindustan Aeronautics, Timken India, SRF Ltd.

The Nifty staged a strong rebound after forming a higher base above 52 weeks EMA. The formation of higher high and low on the weekly chart signifies rejuvenation of upward momentum that makes us confident to revise support base at 16500 as it is confluence of:A) 50% retracement of current up move (15671-17345), placed at 16508B) last week’s low is placed at 16555

Bank Nifty Outlook

The Bank Nifty gained for the second consecutive week and closed higher by more than 5% amid strong pullback in the global equity market aided by cool off in crude oil prices and VIX. The weekly price action formed a sizable bull candle with a higher high-low after five week’s corrective phase signaling resumption of up move.

Index has retraced 61.8% of the recent decline at 36600 in just two weeks. Going ahead, bias remains positive and any temporary breather towards 35000-35500 levels should not be seen as negative, instead should be capitalized as a buying opportunity in quality banking stocks.

Sustainability above 36600 will lead to extension of the current up move towards 38000 levels in the coming weeks being the 80% retracement of the February-March decline (39424-32155)Structurally, buying demand emerged from the major support area of 32500 in the last two weeks and has lead to a formation of higher high-low in the weekly chart. This makes us confident to revise the support base higher towards 34000 levels being the confluence of the following technical observations:a) 50% retracement of the last two weeks up move (32155-36612) placed at 34300 levelsb) The bullish gap area of 10th March 2022 is also placed around 34000 levels

Among the oscillators the weekly stochastic has rebounded from the oversold territory and has generated a buy signal moving above its three periods average thus validating positive bias in the index.

Dharmesh Shah is the Head – Technical at ICICI Direct. Please consult your financial advisor before investing.)

ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 21/01/2022 or have no other financial interest and do not have any material conflict of interest. I-Sec or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months.