Nifty to trade in 16200-15600 range this week, Bank Nifty remains in uptrend; Infosys, Tata Steel in focus

By Rajesh Palviya

Nifty started the previous week on a positive note and remained consolidated for most part of the week however Friday’s gains pulled the index higher to end in green. Nifty closed at 15799 with a gain of 129 points on a weekly basis.

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 the current week has seen Long build up with a price gain of 116 points (0.74%) and total OI addition of 15.11 lac shares(13.14%) increasing from 115.05 Lac share to 130.17 Lac shares. Nifty traded at a premium of 18 points compared to 31 points, while the sentiment indicator PC Ratio is currently trading at 1.35 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 17th June is at 16,000(29.90L), 15,800(27.63L) & 16,200(24.49) strike, with 16,000 & 16,200 acting as a strong resistance wherein there has been writing of 12.95Lac shares & 13.52 Lac shares respectively.

The high OI on the PUT side is at 15,700(24.96L), 15,800(20.25L) & 15,600(19.28L) strike, with 15,800 & 15,700 acting as a strong support as there has been of writing of 13.64Lac shares & 5.98 Lac shares respectively. The tentative range for the current week is likely to be between 16,200 to 15,600. IndiaVix indicator of market volatility is currently at 14.10% down by -11.53% from 15.94% of last week and has been in downward trajectory from its recent high of 17.96% 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 previous week on a flat note and remained in a narrow range (35800-35000) throughout the week, indicating lack of strength on either side. Bank Nifty closed at 35047 with a loss of 244 points on a weekly basis.

On the weekly chart the index has formed a small Bearish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction. Since the past three weeks, index is consolidating within 35800-34400 levels indicating short term consolidation. Hence any either side breakouts will indicate further direction.

The chart pattern suggests that if Bank Nifty crosses and sustains above 35500 level it would witness buying which would lead the index towards 36000-36500 levels. However if the index breaks below 34600 level it would witness selling which would take the index towards 34000-33700. Bank Nifty is trading above 20 , 50 and 100 day SMA’s 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 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 current week has seen Long Unwinding with a price cut of -399 points (-0.96%) and total OI unwinding of -0.64 lac shares (-3.37%) decreasing from 19.10 Lac share to 18.45 Lac shares and traded at premium of 122 points compared to 217 points. In Bank Nifty the high OI on the CALL side in the weekly expiry scheduled 17th June is at 35,500(12.69L), 36,000(11.37L) & 37,000(8.80L) strike, with 36,000 & 35,500 acting as a strong resistance wherein there has been writing of 5.73Lac shares & 7.00 Lac shares respectively. The high OI concentration on the PUT side is at 34,500(7.64L), 34,000(7.86L) & 33,000(6.64L) strike, with 34,000 & 34,500 acting as a strong support as there has been of writing of 3.78Lac shares & 3.51Lac shares respectively. The tentative range for the current week is likely to be between 36,500 to 34,000 with 35,000 acting as an important level as both Call & Put has high OI concentration of 12.91L & 13.26L shares respectively and also have seen significant OI addition of 7.50L & 7.34L shares.

Sectors and stocks in focus this week

We believe the IT, Pharma & Healthcare, Metal, Power ,Oil & Gas and Realty sectors can do well in the near term . One can focus on stocks like Aurobindo Pharma, Dr Reddy’s Laboratories, Dr Lal Pathlabs, NMDC, Tata Steel, Infosys, Coal India, DLF, as these can do well in near term. From Midcap space one can focus on stocks like Skipper, ACE Construction, Kiri Industries, JKIL and DCB Bank.

(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.)