Through Rajesh palviya
Nifty started the week flat and buying momentum throughout the week led the index to close on a strong note near the week’s high. Nifty closed at 17585 with a gain of 216 points on a weekly basis. On the weekly chart, the index formed a long bullish candle forming a higher high-low from the previous week and closed above the previous week’s high, indicating a positive bias. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart, indicating a positive bias.
The chart diagram suggests that if Nifty crosses and holds above the 17800 level, it would witness some buying that would drive the index towards the 18000-18300 levels. However, if the index goes below the 17500 level, it would cause a sell off, bringing the index towards 17300-17000. Nifty is trading above the 20 and 50 day SMAs, which is an important short-term moving average, indicating a positive short-term bias. Nifty continues to remain in an uptrend over the medium term, so buying troughs continues to be our preferred strategy. For the week, we expect Nifty to be trading in the 18000-17400 range with a positive bias.
The RSI Weekly Strength Indicator is above its respective benchmarks indicating a positive bias
Clever derivative perspectives
The nifty futures closed at 17,603.15 on a positive note with a -2.19% drop in open interest and a 1.38% price gain indicating short hedging. The ingenious annualized volatility index, India VIX, fell to 15.21% from 13.94. PCR OI during the week reached a high of 1.58 and a low of 1.15 and closed on a weekly basis at levels of 1.15. The accumulated options show that for now Nifty has strong support at 17,200 followed by 17,300 and 17,500 and resistance at 17,500 followed by 17,800 and 18,000.
This week, a major addition to the monthly expiration was observed on the PUT front with 17,600 17,700 and 17,500 strikes adding respectively 16.03 lakh, 12.54 lakh and 15.92 lakh in OI; while there was an unwinding of 9.94 lakh shares witnessed 17,000 strikes. This week, a major addition to the monthly expiration was seen on the CALL front with 17,600, 17,700 and 17,800 strikes adding 6.87 lakh, 6.69 lakh and 7.51 lakh shares in OI, respectively; while the course was observed in 17,300 and 17,400 shares at 5.08 lakh and 5.23 lakh respectively.
Shrewd outlook from the bank
Bank Nifty started the week on a flat note and buying momentum for most of the week led it to close on a positive note. Bank Nifty closed at 37812 with a gain of 1129 points on a weekly basis.
On the weekly chart, the index formed a large bullish candle forming a higher high-low from the previous session, indicating a positive bias. The index is moving into an upper upper and lower upper formation on the weekly chart, indicating a sustained uptrend on the long-term charts. The graphical pattern suggests that if Bank Nifty breaks and holds above the 38100 level, it would witness some buys that would drive the index towards the 38500-38800 levels. However, if the index goes below the 37000 level, it would witness a sell off which would take the index towards 36500-36200. Bank Nifty is trading above the 20, 50 and 100 day SMAs which are important short term moving averages, indicating a positive bias in the short to medium term. Bank Nifty continues to remain in an uptrend over the medium term, so buying on lows continues to be our preferred strategy. For the week, we expect Bank Nifty to be trading in the 38800-37000 range with a positive bias.
The RSI Weekly Strength Indicator and Stochastic Dynamics Oscillator have both turned positive and are above their respective benchmarks indicating a positive bias.
Bank Nifty Derivatives Outlook
Bank Nifty futures closed at 37,850.05 on a positive note with a -0.73% drop in open interest and price gains of 2.93% indicating short hedging. FII index futures activity was on the “buy” side over the past week. The open interest position of FIIs in index futures is at Rs 15,864 increased by 962 crore and in equity futures it is at Rs 1,29,297 increased by 4,476 crore. Bank Nifty has solid support at 37,000; like 37,000 Put strike has a high OI concentration followed by 37,500 & 36,500 while on the Call front 38,000CE strike has a high OI concentration indicating a high resistance level followed by 38,500 & 39,000.
Sectors and short-term stocks
We expect IT, Chemicals, FMCG and Telecommunications to show strength as the Pharmaceuticals, Automotive and Power sectors remain in consolidation mode. We expect stocks like Bharti Airtel, HCL Tech, Deepak Nitrite, Havells India, Voltas, Dabur India, Kotak Mahindra Bank, Hero MotoCorp, Polycab India, SBI Life Insurance Company may show strength in the short term.
(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. The opinions expressed are those of the author.)