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Nifty set to hit 17600 in September, Bank Nifty remains positive; RIL, SBI, Titan look strong on charts

On expected lines, broader market indices regained upward momentum as Nifty midcap index scaled to a fresh all-time high

By Dharmesh Shah

Equity benchmarks endured their record setting spree over fifth consecutive week as Nifty scaled to fresh all time high of 17340. The Nifty settled the week at 17324, up 3.7%. The Nifty midcap and smallcap indices outperformed the benchmark by gaining 4%, each. Sectorally, all major indices ended in green led by BFSI, Consumption, Telecom, Infra and realty

Nifty Technical Outlook

The Nifty started the week with a positive gap (16705-16765) and continued to march upward, which helped the Nifty to achieve its target of 17200 (as discussed in monthly report). The weekly price action formed a sizable bull candle carrying higher high-low, indicating acceleration of upward momentum after past two week’s consolidation (16700-16400) breakout. In the process, Nifty midcap index scaled to a fresh all time high

The formation of higher peak and trough supported by across sector participation signifies inherent strength that makes us confident to reiterate our positive stance and expect Nifty to head towards our revised target of 17600 in September 2021 as it is the price parity of July – mid August rally (15515-16700), projected from mid-August low of 16376. However, the upward journey will be nonlinear and buy on declines strategy should work well as the bouts of volatility at higher levels cannot be ruled out after past five week’s 12% rally which hauled daily and weekly stochastic oscillator in overbought territory. In upcoming truncated week, any temporary breather should be capitalised to accumulate quality stocks as over past 15 months buying on declines strategy has worked well for equity investors

Nifty set to hit 17600 in September, Bank Nifty remains positive; RIL, SBI, Titan look strong on charts

Sectorally, we expect BFSI, Capital Goods, Consumption, Infra and Telecom to outperform, while Metal & Auto sectors provide favourable risk-reward at current juncture

In large caps we like Reliance Industries Ltd (RIL), SBI (State Bank of India), Kotak Mahindra Bank, Tech Mahindra, Titan. while in Midcaps we prefer Godrej Properties , Canara Bank, Happiest Minds Technologies, Zensar Technology ,Concor Navin Fluorine, Cummins India

On expected lines, broader market indices regained upward momentum as Nifty midcap index scaled to a fresh all-time high. However, Nifty small cap index is just 2% away from its all-time high. We believe, the small cap index has formed a higher base above 50 days EMA (which has been held since June 2020) and expect it witness catch up activity in coming weeks

Structurally, as per classic Dow Theory, the formation of higher high and low, signifies continuance of positive bias which makes us confident to revise support base upward at 16900, as it is 50% retracement of current up move (16376 -17340)

Bank Nifty Outlook

The Nifty Bank gained for the second consecutive week and closed higher by more than 3%. The weekly price action formed a strong bull candle with a higher high-low, the index in the process registered a resolute breakout above the last four months’ consolidation range (36300-34000) signaling continuation of the positive trend
Going ahead, we expect the index to maintain positive bias and gradually head towards 37700 levels in the coming weeks as it is the confluence of the measuring implication of the recent range breakout (36300-34800) and the previous all-time high of February 2021

Nifty set to hit 17600 in September, Bank Nifty remains positive; RIL, SBI, Titan look strong on charts

The index has recently witnessed a faster retracement of its preceding decline as 10 sessions decline (36317-34817) was completely retraced in just five sessions. A faster retracement in less than half the time interval highlights positive structure

Buying on declines strategy has worked well over past 15 months. Hence, any breather in the coming week would offer incremental buying opportunity in quality banking stocks

The index is seen forming higher high-low in the larger degree chart, which gives up confident to revise the support base higher towards Rs 35300-35500 levels as it is the confluence of the following technical observations:
– 80% retracement of the current up move (34817-37140) placed around 35300 levels
– rising 10 weeks EMA also placed around 35480 levels
– the value of the rising trend line joining the previous lows is also placed around 35400 levels

The weekly 14 periods RSI has generated a buy signal moving above its nine periods average thus validates positive bias

(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

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