Nifty 50 has remained range-bound between 15,950-15,450 levels for several weeks now, struggling to reach 16,000. However, this consolidation is likely to result in strong base formation at 15,450 helping the Nifty 50 touch fresh all-time highs at 16,300, said ICICI Direct in a note. “Current strong base formation will act as a launchpad for the next leg of up move within a structural uptrend. Going ahead, a decisive close above 15,950 with multi-sector participation would confirm the resumption of primary uptrend and accelerate upward momentum to 16,300,” they added. Any correction beyond 15,450 is seen by ICICI Direct as an extended bull market correction and not as a negative.
Nifty gearing up for 16,300
Analysts at ICICI Direct believe that the Nifty is signalling a robust price structure. “Nifty has undergone shallow retracement as over the past seven weeks it merely retraced 23% of preceding eight week’s rally, signalling robust price structure. We expect the ongoing consolidation to act as a base for the next leg of up move within the structural bull trend,” they added. The brokerage firm said that a decisive close above 15,950 supported by multi-sector participation would confirm the resumption of primary uptrend and accelerate upward momentum to 16,300 levels.
In the event of a breach below the lower band of consolidation, at 15,450, due to global volatility, ICICI Direct expects a temporary panic sell-off but cautions that this should not be construed as structurally negative. “Instead dips should be capitalised on to build a quality portfolio from a medium-term perspective as we do not expect the index to breach the key support threshold of 15100…” they added.
Bank Nifty price structure positive
Coming to Bank Nifty, ICICI Direct said the index has retraced just 50% of its May rally over the past eight weeks signalling a positive price structure. “Lack of faster retracement in either direction signals extension of ongoing consolidation with positive bias in the broader range of 33,900-35,900,” they added. A decisive close above 35,900 would confirm the resumption of uptrend, ICICI Direct said.
Sectors that may outperform
In terms of sectoral performance, the note highlights that Information Technology stocks along with metals are placed in the outperforming quadrant and are expected to continue with their positive momentum. “Bank index has consolidated for the last two months, with banking stocks placed at a support level, thus providing favourable risk-reward setup,” they said. Capital goods and Auto stocks are seen to be bargain buys after the recent breather.