Nifty to hit 16,100 if it holds above 15,800, Bank Nifty to trade mixed this week; ICICI Bank, SBI in focus

By Rajesh Palviya

Nifty started the previous week on a flat note but continued its positive momentum to end the week on a strong note. Nifty closed at 15670 with a gain of 235 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 closed above previous week’s high indicating positive bias. On the weekly chart, the index has observed a “Rounding Bottom” breakout indicating resumption of the earlier up trend.

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 view

Nifty in the current week has seen Long build up with a price gain of 237 points (1.53%) and total OI addition of 3.91 lac shares(3.52%) increasing from 111.15 Lac share to 115.05 Lac shares. Nifty traded at a premium of 31 points compared to 28 points, while the sentiment indicator PC Ratio is currently trading at 1.30 which is above the median line but still in a comfortable zone indicating positive bias. In Nifty the high OI on the CALL side in the weekly expiry scheduled 10th June is at 15,700(34.52L), 16,000(30.54L) & 15,800(28.86L) strike, with 15,800 & 16,000 acting as a strong resistance wherein there has been writing of 16.10Lac shares & 8.45 Lac shares respectively while 15,700 is likely to act as a pivotal level wherein there has been addition of 14.17Lac shares.

The high OI on the PUT side is at 15,500(26.27L), 15,600(19.97L) & 15,400(19.43L) strike, with 15,400 & 15,500 acting as a strong support as there has been of writing of 8.72Lac shares & 9.89 Lac shares respectively. The tentative range for the current week is likely to be between 15,400 to 16,000. IndiaVix indicator of market volatility is currently at 15.94% down by -1.46% from 17.40% of last week and has been in downward trajectory from its recent high of 21.32% suggesting confidence and stability in current market trend and further descend from these levels will augment for more of an uptrend in market.

Bank Nifty outlook

Bank Nifty started the week on a flat note and remained in narrow range (35800-35000) throughout the week, indicating lack of strength on either side. Bank Nifty closed at 35292 with a gain of 150 points on a weekly basis.

On the weekly chart, the index has formed a “Doji” candlestick formation indicating indecisiveness amongst market participants regarding the direction. The index is moving in a Higher Top and Higher Bottom formation on the daily chart indicating sustained up trend on long term charts.

The chart pattern suggests that if Bank Nifty crosses and sustains above 35700 level it would witness buying which would lead the index towards 36000-36500 levels. However if index breaks below 35000 level it would witness selling which would take the index towards 34500-34000. Bank Nifty is trading above 20, 50 and 100 day SMAs which is 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 36500-34500 with mixed bias.

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

Bank Nifty derivative outlook

Bank Nifty in the current week has seen Long build up with a price gain of 187 points (0.53%) and total OI addition of 0.99 lac shares (5.45%) increasing from 18.12 Lac share to 19.10 Lac shares and traded at premium of 217 points compared to 180 points. In Bank Nifty the high OI on the CALL side in the weekly expiry scheduled 10th June is at 36,000(11.33L), 36,500(9.12L) & 37,000(8.97L) strike, with 36,000 & 36,500 acting as a strong resistance wherein there has been writing of 5.20Lac shares & 5.40 Lac shares respectively. The high OI concentration on the PUT side is at 34,500(8.69L), 34,000(19.97L) & 35,000(7.05L) strike, with 34,000 & 34,500 acting as a strong support as there has been of writing of 3.88Lac shares & 5.14Lac shares respectively. The tentative range for the current week is likely to be between 36,500 to 34,000; with 35,500 acting as an important level as both Call & Put has high OI concentration of 15.22L & 11.17L shares respectively and also have seen significant OI addition of 11.24L & 6.73L shares.

Sectors, stocks in focus this week

We expect the Banking, Pharma, Oil & Gas, Power, Insurance and Telecom sectors to do well in the near term. One can focus on stocks like ICICI Bank, State Bank of India (SBI), HDFC (Housing Development Finance Corporation), Larsen & Tubro, Glenmark Pharma, Coal India, NMDC, PI Industries, Bajaj Finserv for a near term bullish trend.

(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.)