Nifty may hit 18000 above 17500, Bank Nifty support at 38700; Maruti Suzuki, Sun Pharma among top bets

By Rajesh Palviya

NSE’s Nifty 50 index traded with extreme volatility on either side throughout the week. However, Friday’s sell-off dragged the index lower to end in red. Nifty closed at 17375 with a loss of 142 points on a weekly basis. On the weekly chart the index has formed a bearish candle carrying either side shadows representing extreme volatility on either side. Since the past three weeks, the index is consolidating within a broad range of 17800- 17000 levels representing a short term sideways trend.

The chart pattern suggests that if Nifty crosses and sustains above 17500 levels it would witness buying which would lead the index towards 17800-18000 levels. However if the index breaks below 17200 level it would witness selling which would take the index towards 17000-16800. For the week, we expect Nifty to trade in the range of 17800-17000 with mixed bias. The daily and weekly strength indicator RSI is moving downwards and is quoting below its reference line indicating negative bias.

Nifty Derivative Outlook

Nifty futures closed at 17356 on a negative note with 0.12% increase in the open interest indicating Short Build Up. Nifty Futures closed at a discount of 31 points compared to the previous day discount of 5 points. FII’s were Sellers in Index Futures to the tune of 1053 crores and were Buyers in Index Options to the tune of 1879 crores, Sellers in the Stock Futures to the tune of 1014 crores. Net Sellers in the derivative segment to the tune of 432 crores.

India VIX index is at 18.68 v/s 17.71. Nifty ATM call option IV is currently 11.60 whereas Nifty ATM Put option IV is quoting at 16.69. Index options PCR is at 1.09 v/s 1.23 & F&O Total PCR is at 0.99 Nifty Put options OI distribution shows that 17400 has highest OI concentration followed by 17600 & 17300 which may act as support for current expiry. Nifty Call strike 17400 followed by 17600 witnessed significant OI concentration and may act as resistance for current expiry.

Bank Nifty Outlook

Bank Nifty started the week on a flat note and traded with extreme volatility on either side for most part of the week, however last session’s selling pressure dragged the index lower to close on a flat note. Bank Nifty closed at 38517 with a loss of 272 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 chart pattern suggests that if Bank Nifty crosses and sustains above 38800 levels it would witness buying which would lead the index towards 39200-40000 levels. However if index breaks below 38300 level it would witness selling which would take the index towards 38000-37500. For the week, we expect Bank Nifty to trade in the range of 39500-37500 with mixed bias. The daily and weekly strength indicator RSI is in bullish mode and sustaining above 50 mark which supports bullish sentiments ahead.

Bank Nifty Derivative Outlook

Bank Nifty closed at 38518 on a negative note with a 2.19% decrease in open interest indicating Long Unwinding. Bank Nifty Futures closed at a discount of 43 points compared to the previous day discount of 51 points. Bank Nifty Put options OI distribution shows that 39000 has highest OI concentration followed by 38700 & 38800 which may act as support for current expiry. Bank Nifty Call strike 39000 followed by 39500 witnessed significant OI concentration and may act as resistance for current expiry.

Sector, stocks in focus this week

We expect automobiles, pharma, PSU Banks, metal sectors may do well in the near-term. Stocks such as Vedanta, Hindalco Industries, Jindal Steel Power, Maruti Suzuki, Escorts, Canara Bank, Bank of Baroda, Biocon, Sun Pharma, BSE may do well in near term.

(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)