Nifty may hit 15,400 in medium term; BFSI, infra sectors, HDFC, RIL, Titan stocks look strong on charts

Despite elevated volatility owing to concern over second Covid-19 wave, Nifty has managed to hold the key support of 14200 and formed a higher base. Image: Reuters

By Dharmesh Shah

Equity benchmarks snapped the past two weeks’ winning streak amid volatile global cues. The Nifty concluded the week on a subdued note at 14678, down 1%. The Nifty midcap lost 0.7% while small-cap gained 0.3%. Sectorally, pharma, FMCG and PSE outshone while metal, IT underwent profit-booking.

Nifty technical outlook

– The weekly price action formed a bear candle carrying higher high-low, indicating breather after the past two weeks’ rally. In the process, stock specific action prevailed as the broader market relatively outperformed.
– The lack of faster retracement on either side signifies extended consolidation (14900-14400) in coming weeks amid stock specific action that would help index to form a higher base. Meanwhile, our medium term view of 15400 remains intact. Hence, traders can use bouts of volatility to their advantage to build long positions by accumulating quality large cap and midcap stocks amid progression of Q4FY21 earning season.
– Sectorally, BFSI, Infra and Consumption provide favourable risk-reward setup, while profit booking in Metal stocks after a sharp rally presents fresh entry opportunity
– Our preferred large caps are HDFC, Reliance Industries Ltd (RIL), Titan Company, Berger Paints, Tata Motors, SAIL while Bata India, Ipca Laboratories, Astral, SKF India, KNR Constructions, Dhanuka Agritech, Gujarat Pipavav Port Ltd (GPPL), Phillips Carbon Black are preferred within midcap space
– In line with our view, the Nifty midcap and small cap indices displayed inherent strength and scaled to fresh 52-weeks high despite minor profit booking in the benchmark. Going ahead, we expect broader markets to maintain its relative positive price structure against benchmark

The Nifty midcap and small cap indices displayed inherent strength and scaled to fresh 52-weeks high despite minor profit booking in the benchmark

– Structurally, we do not expect the index to breach the key support threshold of 14200. Despite elevated volatility owing to concern over second Covid-19 wave, it has managed to hold the key support of 14200 and formed a higher base. Hence 14200 would continue to act as a key support as it is confluence of:
a) 100 days EMA placed at 14300
b) last month’s low placed at 14151

Bank Nifty outlook

– The Index snapped two weeks up move and closed the week down by more than 2%. The weekly price action formed a bear candle which mostly remained within previous week high-low range signalling consolidation and lack of follow through to previous two weeks up move
– Going ahead, we expect the index to continue with its last two weeks consolidation with positive bias in the broad range of 31500-33300. The lack of faster retracement on either side signifies extended consolidation that would help the index to form a higher base.
– The index has immediate support at 32000-31500 levels being the confluence of the last two weeks low and the 61.8% retracement of the previous up move (30405-34287).
– The index has maintained the rhythm of not correcting more than 20% as witnessed since March 2020. In the current scenario, it rebounded after correcting 19% from the all-time high (37708). Hence it provides favourable risk-reward setup for the next leg of up move

Structurally, we do not expect the index to breach the key support threshold of 30000-30500

– Structurally, we do not expect the index to breach the key support threshold of 30000-30500. Despite elevated volatility owing to concern over second Covid-19 wave, it has managed to hold the key support of 30500 and formed a higher base. Hence 30500-30000 would continue to act as a key support as it is confluence of:
a. 200 days EMA placed at 30259
b. last month’s low placed at 30405
c. Price equality with the two major decline in the last 14 months from the all-time high (37708) also highlights major support around 30000 levels
– Among the oscillators, the weekly stochastic remains in uptrend and is seen oscillating around the neutral reading of 50 indicating consolidation with positive bias in the coming weeks

(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