Nifty support at 15200, buy on dips, Bank Nifty may head to 34500; Buy SBI, Infosys, ITC to pocket gains
By Dharmesh Shah
Equity benchmarks edged last week higher amid volatile global cues. The Nifty ended the week at 15752, up 0.3%. The broader market performed in tandem with the benchmark as Nifty midcap, small cap gained 0.5% and 1%, respectively over the week. Sectorally, FMCG, metal, IT, realty extended pullback while financials relatively underperformed during the week
Nifty Technical Outlook
The index remained volatile during monthly expiry week. After the initial blip, Friday’s 300 points strong recovery from the 15500 zone helped index to recoup intra-week losses. As a result, daily price action formed a hammer like candle carrying a small bull candle with long lower shadow around 50% retracement of last week’s up move, highlighting turnaround in sentiment. Consequently, our buy on dips strategy fared well
The formation of higher high-low on the weekly chart signifies continuance of positive bias. Going forward, holding June lows of 15200 would keep pull back options open towards 16200 in a gradual manner in coming weeks as it is confluence of:
a) 61.8% retracement of June decline (16794-15183)
b) upper band of negative gap recorded on June 13 (16201-15878)
Key point to highlight is that, over past four sessions index retraced merely 50% of preceding five sessions up move. The slower pace of retracement signifies buying demand emerging at elevated support base. Thus buying dips amid global volatility would be the prudent strategy as we believe strong support for the Nifty is placed at 15200
Going forward, traction in Brent Crude Oil prices will be key monitorable as it has snapped past six month winning streak. A decisive close below 107 would lead Brent prices towards 100, which could fuel upward momentum in equities
Amongst sectors, Auto, Consumption, Pharma preferred while BFSI and IT to witness stock specific action
We prefer SBI, Infosys, ITC, Hindustan Unilever, Divis Laboratories, ABB, Maruti Suzuki, in large caps while in midcaps we prefer Ashok Leyland, Blue Dart Express, Federal Bank, Minda Industries, MM Forgings, Dr Lal Pathlabs, Granules, Havells India, Trent, Phoenix Mills
The broader market indices mirrored the benchmark move during the week and extended breather wherein Nifty midcap, smallcap indices have been sustaining above last week’s hammer like candle. In three instances over the past decade, intermediate correction in the Nifty Midcap, Small cap indices have been to the tune of 28% and 40%, respectively. At present, both indices have bounced after correcting 25% and 34%, respectively. Therefore, base formation from here on would set the stage for a technical pullback in coming weeks
Bank Nifty Outlook
The Bank Nifty traded choppy and closed marginally lower in the previous week amid volatile global cues. The index closed the week at 33539 levels down by 0.3%. The weekly price action formed a bear candle with a long lower shallow as the index opened higher but failed to sustain at higher levels and gave up its gains. However, buying demand at lower levels around the 33000 levels saw the index recover its intraweek decline and close on a flat note
Going ahead, we expect the index to gradually head towards 34500 levels in the coming weeks as it is the higher band of bearish gap area of 13th June 2022 and the 61.8% retracement of the decline of June 2022 (36083-32290). Hence use dips towards 32600-33000 levels being the 80% retracement of the recent up move (32291-34147) as an incremental buying opportunity
In a smaller time frame the index has already taken five sessions to retrace just 61.8% of its preceding six sessions up move (32291-34147). A shallow retracement signals a higher base formation
The index has key immediate support around 32100 levels as it is the almost identical lows March and June 2022 placed around 32155 levels
Amongst momentum oscillators, weekly RSI has formed a positive divergence with June low reading of 38 against May 2022 reading of 37 while price made new low. Such divergence is indicating receding downward momentum and likely to trigger further technical pullback in 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 17/06/2022 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.