Nifty above 17500 would aim for 17800, Bank Nifty charts suggest negative bias; Reliance, Infosys top bets

Nifty above 17500 would aim for 17800, Bank Nifty charts suggest negative bias; Reliance, Infosys top bets

By Rajesh Palviya

NSE Nifty 50 started the week on a negative note and traded with extreme volatility on either side throughout the week. Nifty closed at 17153 with a loss of 134 points on a weekly basis. Since past six trading sessions, index continued to consolidate within 17500-17000 levels representing a sideways trend and hence any either side breakout will confirm further direction. The chart pattern suggests that if Nifty crosses and sustains above 17500 levels it would witness buying which would lead the index towards 17600-17800 levels. However if index breaks below 17000 level it would witness selling which would take the index towards 16800-16600. For the week, we expect Nifty to trade in the range of 17600-16800 with mixed bias. The daily and weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.

Nifty futures closed at 17194 on a negative note with 3.85% decrease in the open interest indicating Long Unwinding. Nifty Futures closed at a premium of 21 points compared to the previous day discount of 7 points. FIIs were Sellers in Index Futures to the tune of 225 crore and were Sellers in Index Options to the tune of 541 crore, Sellers in the Stock Futures to the tune of 343 crore. Net Sellers in the derivative segment to the tune of 1243 crore. India VIX index is at 23.43 v/s 23.93. Nifty ATM call option IV is currently 20.19 whereas Nifty ATM Put option IV is quoting at 24.44. Index options PCR is at 0.94 v/s 0.91 & F&O Total PCR is at 0.91.

Nifty Put options OI distribution shows that 17000 has highest OI concentration followed by 17200 & 16900 which may act as support for current expiry. Nifty Call strike 17500 followed by 17200 witnessed significant OI concentration and may act as resistance for current expiry.

Bank Nifty Outlook

Bank Nifty started the week on a positive note but witnessed selling at higher levels to end the week on weak note. Bank Nifty closed at 35410 with a loss of 1018 points on a weekly basis. On the weekly chart the index has formed a Bearish candle with a long upper shadow indicating selling at higher levels. The chart pattern suggests that if Bank Nifty crosses and sustains above 36000 level it would witness buying which would lead the index towards 36500-37000 levels. However if index breaks below 35000 level it would witness selling which would take the index towards 34500-34000. Bank Nifty is trading below 50, 100 and 200 day SMA indicating negative bias in the short to medium term.

For the week, we expect Bank Nifty to trade in the range of 37500-35000 with mixed bias. The daily and weekly strength indicator RSI both are in negative terrain and are below their respective reference lines indicating negative bias.

Bank Nifty Derivative Outlook

Bank Nifty closed at 35558 on a negative note with 6.99% decrease in open interest indicating Long Unwinding. Bank Nifty Futures closed at a premium of 35 points compared to the previous day premium of 56 points. Bank Nifty Put options OI distribution shows that 35500 has highest OI concentration followed by 35300 & 35000 which may act as support for current expiry. Bank Nifty Call strike 36000 followed by 35500 witnessed significant OI concentration and may act as resistance for current expiry.

Sectors & Stocks to watch

We expect the Pharma, IT, Reality and Metal sector to do well in the near-term. One can focus on stocks like Mindtree, Infosys, Tata Chemicals, Jindal Steel Power, Hindalco Industries, Aurobindo Pharma, Biocon, Reliance Industries (RIL), Indian Hotels, Adani Enterprises, DLF, Godrej Properties may show strength in near term.

(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)