Nifty may head to 18200 in October, Bank Nifty to hit 38600; RIL, Infosys, others among top money-making ideas

Our structural positive stance for Nifty remains intact as we expect Nifty to surpass psychological mark of 18000

By Dharmesh Shah

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Equity benchmarks endured their record-setting spree over eight consecutive weeks as Nifty hit all-time high of 17948 despite global volatility. The Nifty settled the week at 17853, up 1.5%. The broader markets relatively underperformed the benchmark as Nifty midcap and small-cap gained ~0.5, each. Sectorally, IT, Realty, FMCG outshone while metal continued to underperform over the week

Nifty Technical Outlook

– The Nifty started the week on a subdued note, however elevated buying demand from key support threshold of 17200 helped index to regain upward momentum and scale to fresh all time high of 17948. The weekly price action formed a bull candle carrying higher high-low, indicating continuance of positive momentum
– Our structural positive stance for Nifty remains intact as we expect Nifty to surpass psychological mark of 18000 and gradually head towards 18200 in coming month as it is implied target of recent consolidation breakout (17800-17325). The constructive stance on the market is based on following observations:
a) The rallies are getting elongated followed by shallow corrections as intermediate corrections have been arresting within 3-4% since April 2021, highlighting robust price structure
b) Indian equities are expected to extend its relative outperformance to global peers as it endured its record setting spree
– We expect Nifty to head towards our target of 18200 in a non-linear manner, therefore advise to follow buy on dips strategy as we don’t expect Nifty to breach strong support of 17400 levels
-On sectoral front, BFSI, Consumption, IT & Telecom to outperform while Auto space offer favourable risk-reward setup
– In large caps we like Infosys, Reliance Industries Ltd (RIL), Asian Paints, Housing Development Finance Corporation (HDFC), State Bank of India (SBI), Piramal Enterprises Ltd, Tata Motors, while in Midcaps we prefer Aditya Birla Fashion and Retail, Persistent Systems, Astral, M&M Finance, Bluedart, Indocount, VIP Industries, Triveni Engineering
– We expect broader market indices to undergo healthy consolidation after 15% rally seen over past four weeks. In the process, stock specific action would prevail with unlock, housing and festive beneficiary themes to be in focus. -Thus, dips should be capitalized to accumulate quality stocks
Structurally, the formation of higher peak and trough has once again confirmed the higher base formation at 17400 level which we do not expect to breach as it is confluence of:
a) 80% retracement of past two weeks up move (17269-17948) at 17405
b) 20 days EMA at 17350, which has been held since July 2021

Bank Nifty Outlook

– The Nifty Bank traded in a range with high volatility and closed the week on a flat note at 37830 levels. The weekly price action formed a small bull candle with a long lower shadow signaling strong support at lower levels. In line with our view, buy on dips strategy has once again worked well as elevated buying demand emerged from crucial support area of 36500

– Going ahead, we expect the index to maintain positive bias and gradually head towards our target of 38600 in the coming weeks as it is the price parity with the previous two major up move of July (34115-36317) and August (34817-37140) each measuring roughly 2250 points added to the recent low of 36327 signals upside towards 38600 levels
– Volatility is likely to remain high in the coming week on account of the monthly expiry of the September series and the volatile Asian cues. Buying on decline strategy has worked well in the last 15 months, thereby the current volatility would present incremental buying opportunity in quality banking stocks
– The index is seen forming higher high-low in the larger degree chart, which gives up confident to revise the support base higher towards | 36500-36300 levels as it is the confluence of the following technical observations:
50% retracement of the current up move (34817-38112) placed around 36500 levels
a) The rising 10 weeks EMA is placed at 36430 level
b) The upper band of the last three months range breakout area is also placed around 36300 levels
c) The last week low is also placed at 36525 levels
– The weekly stochastic remain in a strong uptrend thus supports the positive bias in the index

(Dharmesh Shah is the Head – Technical at ICICI Direct. Please consult your financial advisor before investing.)

ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 22/04/2021 or have no other financial interest and do not have any material conflict of interest. I-Sec or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months