Nifty to hit 17600 in coming weeks, volatility on cards, Bank Nifty support at 34800; TCS, HCL Tech top stocks

Nifty to hit 17600 in coming weeks, volatility on cards, Bank Nifty support at 34800; TCS, HCL Tech top stocks

By Dharmesh Shah

Equity benchmarks concluded the CY21 on buoyant note tracking positive global cues. The Nifty 50 index ended the week at 17354, up 2%. The Nifty midcap, small cap indices relatively outperformed the benchmark by gaining 3% and 4%, respectively. Sectorally, all major indices ended in green led by pharma, IT, auto.

The improving market breadth supported by multi sector participation makes us believe that the index would extend ongoing up move towards 17600 levels in coming weeks. In the process, bouts of volatility cannot be ruled out. However, any dip from hereon should not be construed as negative instead capitalise it as an incremental buying opportunity as we expect strong buying demand to emerge around 17000-17800 zone. Our earmarked target of 17600 is based on following observations:

A) price parity of last week’s up move (16410-17155), projected from current week’s low of 16833, is placed at 17605

B) December 2021 high is placed at 17639

Amongst sectors, IT, capital goods, textiles are expected to endure relative outperformance while, BFSI, metal, infra and auto are placed with favourable risk-reward setup

In large cap space we like TCS (Tata Consultancy Services), HCL Technologies, Titan Company, Sun Pharmaceutical Industries, UltraTech Cement, Larsen & Toubro (L&T), DLF. While in midcap space, we prefer Bharat Electronics Ltd, Vardhman Textiles, Zensar Technologies, Fortis Healthcare, National Aluminium, Gaberial India, SKF India, Sanghavi Movers, Canara Bank, Gokaldas Exports

Key point to highlight is that the Nifty midcap, small cap indices have formed a higher base above 100 days EMA which has been majorly held since June 2020 that makes us confident that broader market would endure its relative outperformance in coming weeks. Structurally, the index has bounced back after approaching maturity of price-time wise correction. Price wise, the index has maintained the rhythm of not correcting for more than 11% since May 2020. Time wise, the index has arrested secondary correction within nine weeks. In the current scenario, the index has bounced after correcting 11.8% over the past nine weeks. Therefore, we believe any intermediate correction from here on would find its feet around 16800 as it is 61.8% retracement of current pullback (16410-17400) placed at 16788 coincided with last week’s low of 16833

Bank Nifty Outlook

The Bank Nifty snapped their two weeks losing streak and settled the week on a positive note higher by 1.9%. The weekly price action formed a bullish engulfing candle as it encompassed last week’s real body and closed above the immediate hurdle of 35500 levels

Going ahead, we expect the index to extend the current pullback towards 37000 levels in the coming weeks as it is the 80% retracement of the immediate previous decline (37581-34018). We believe strong buying demand exists around 34800-34500 levels. Hence, any dip should be capitalise as an incremental buying opportunity.

On expected lines buying demand emerged after approaching maturity of price-time correction. As a result, index maintained rhythm of not correcting for more than 20% price wise and 9 weeks’ time wise, since May 2020

Immediate support is placed around 34800-34500 levels being the confluence of the rising demand line joining lows of the last two weeks and the rising 52 weeks EMA currently placed at 34717 levels

Among the oscillators the weekly stochastic is rebounding from the oversold territory and is placed at a reading of 23, thus supports pullback in the index in the coming weeks

(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 22/04/2021 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.