Nifty to rally if it holds above 16,350, Bank Nifty may head to 36,800; TCS, Lupin stocks in focus

By Rajesh Palviya

Nifty closed at 16238 with a gain of 475 points on a weekly basis. On the weekly chart the index has formed a long bullish candle forming higher High-low compared to previous week and has decisively broken out its past two months multiple resistance zone of 15900 levels on a closing basis. The index is moving in a Higher Top and Higher Bottom formation on the weekly chart indicating a sustained uptrend.

The weekly strength indicator RSI and momentum oscillator Stochastic have both turned positive and are above their respective reference lines indicating positive bias.

Nifty Derivative Outlook

Nifty in current week has seen Long Build Up with a price gain of 474 points (3.01%) and OI addition of 28.97 lakh shares (30.75%) increasing from 94.19Lac share to 123.17 lakh shares and traded at premium of 13 points compared to 14 points suggesting positive bias. The sentiment indicator PC Ratio (Nifty) is currently trading at 1.40 which is above the median line but in a comfortable zone for bullish momentum.

Nifty continues to remain in an uptrend in the medium term.

Nifty highest OI on the CALL side in the weekly expiry scheduled 12th August is at 16,300(34.80L), 16,400(31.17L) & 16,500(27.28L) strikes respectively wherein writing of 15.27 lakh shares was witnessed at 16,400 strike & 11.65 lakh shares of writing was seen at 15,550 strike indicating strong resistance zone at 16,500-16,550, while on the PUT side highest OI is at 16,000(30.74L), 16,200 (29.24L) & 15,800 (22.17L) strikes; wherein writing of 7.74 lakh & 7.19 lakh share was seen at 15,800 & 16,000 strikes respectively indicating a strong support zone. So, the most probable range for the weekly expiry is likely to be between 16,000 to 16,500.

Bank Nifty Outlook

Bank Nifty started the week with an upward gap and buying momentum for most part of the week led it to close in positive territory. Bank Nifty closed at 35809 with a gain of 1225 points on a weekly basis.

On the weekly chart the index has formed a sizable bullish candle forming higher High-low compared to previous week indicating positive bias. Since the past three months, index is consolidating within 36000-34000 levels indicating short term consolidation. Hence any either side breakout will indicate further direction. The chart pattern suggests that if Bank Nifty crosses and sustains above 36000 level it would witness buying which would lead the index towards 36500-36800 levels.

However if the index breaks below 35600 level it would witness selling which would take the index towards 35200-34500. Bank Nifty is trading above 20 , 50 and 100 day SMAs which is an important short term moving average, indicating positive bias in the short term. Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy. For the week, we expect Bank Nifty to trade in the range of 36800-35300 with a positive bias.

Bank Nifty continues to remain in an uptrend in the medium term, so buying on dips continues to be our preferred strategy

The weekly strength indicator RSI is in positive terrain and sustaining above its respective reference line indicating positive bias.

Bank Nifty Derivative Outlook

Bank Nifty in current week has seen Short Covering with a price gain of 1268 points (3.66%) and OI shedding of 1.44 lakh shares (-6.85%) decreasing from 20.97 lakh share to 19.53 lakh shares and traded at premium of 132 points compared to 89 points. In Bank Nifty the high OI on the CALL side in the weekly expiry scheduled 12th August is at 36,500(10.85L), 37,000(10.36L) & 37,500(7.55L) strike, with 36,200 & 36,500 acting as a strong resistance wherein there has been writing of 4.09 lakh shares & 3.89 lakh shares respectively.

The high OI concentration on the PUT side is at 35,000(11.41L) & 35,500(9.09L) strike, with 35,500 & 35,000 acting as a strong support as there has been of writing of 4.55 lakh shares & 4.23 lakh shares respectively; while the important level to watch will be 36,000 as there has been addition of 6.66L shares on Call side & 1.36L shares on Put side clearly indicating to be a decisive level for next week. The tentative range for the current week is likely to be between 35,000 to 36,500.

Sectors and Stocks to watch this week

We expect the IT, Metal, Realty and Chemical sectors to do well in the coming trading sessions. Stocks like TCS, Mindtree, Tech Mahindra, Lupin, SAIL, Tata Steel, DLF, Deepak Nitrite, Bata India, Bharti Airtel, Aarti Industries can do well in near term.

(Rajesh Palviya is Vice President– Research (Head Technical & Derivatives) at Axis Securities Limited. The views expressed are the author’s own. Please consult your financial advisor before investing.)