Benchmark indices Nifty and Sensex maintained their momentum, closing at record highs on Friday. This marked Nifty’s best week in two months, extending its winning streak to 12 consecutive sessions.
The 30-share BSE Sensex climbed 231 points, or 0.28%, to close at 82,365, while the broader NSE Nifty gained 84 points, or 0.33%, ending at 25,235. This is the third consecutive day the Nifty has closed at a record high.
Analyst Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research at SBI Securities, discussed the market outlook as well as specific stocks and sectors for the new series with ET Markets. Below are the edited excerpts from his conversation:
Nifty is sustaining above the 25k mark, and analysts believe it is set to make new record highs in the near future. What are your views on this?
In August, Nifty experienced significant volatility, with 12 trading sessions opening either with a major upside or downside gap. Throughout the month, it has fluctuated over a 1300-point range, underscoring the heightened market volatility. Despite this, the index reached new all-time highs and closed the month above the significant psychological level of 25,200. Most noteworthy, for the third consecutive month, the index has ended on a positive note. On a monthly scale, it has formed a bullish candle with a long lower shadow, which indicates buying interest at a lower level.Steady sector rotation has played a crucial role in supporting the market and maintaining these elevated levels. During the month, Nifty IT, Nifty Pharma, and Nifty Healthcare have strongly outperformed frontline indices. We believe these sectors are likely to continue their northward journey in the next couple of trading sessions.Coming back to Nifty on Thursday, the index has given a horizontal trendline breakout on a daily scale, which is a bullish sign. The momentum indicators and oscillators also support the overall bullish chart structure. The daily and weekly RSI is in the super bullish zone as per the RSI range shift theory. The daily MACD histogram suggests a pickup in upside momentum.In terms of levels, the index is likely to test 25,600, followed by 25,800 in the short term. On the downside, support has shifted higher to the 24,900-24,850 range.
As August expiry is done and dusted, the monthly OI data sees 52,000 call writers at 25,200 ITM strike and then at 25,300 with 24,200 call writers. For the put writers, highest concentration is also at 25,200 followed by 25,100 strikes. How to read this data for the September monthly expiry?
There is a notable concentration of call open interest at the 25500 strike, followed by the 25700 strike. While significant open interest on the put side is observed at the 25200 strike, followed by the 25000 strike. As per the Straddle cost of ATM strike, the range for the next couple of trading sessions will be 25477-24990 level.
For the weekly series, the highest call writing is at the 25,200 level, followed by 25,500. Given that the index was trading above 25,200 for a significant part of Friday’s session, what is the significance of the 25,200 level?
Call writers might be anticipating that the markets are currently overextended and could experience a pullback towards 25,000 in the coming trading sessions. The 25,200-25,300 strike price has the highest open interest for this week’s expiry. When accounting for option premiums, the risk for option sellers increases above the 25,400-25,430 range.
Despite Nifty opening with a gap up, there has been no significant unwinding of positions, as substantial follow-up buying has been lacking. Therefore, significant short covering might occur once Nifty manages to surpass and sustain above the 25,400-25,430 range
Nifty IT is currently at a record high, seemingly unaffected by global sentiments. What are your thoughts on this?
On a weekly scale, Nifty IT has given stage-2 Cup pattern breakout. The depth of the pattern is 34%, and the width is 131 weeks. The momentum indicators and oscillators also support the overall bullish chart structure.
Do you have any recommendations for IT stocks to trade or accumulate for the medium to long term?
LTIM: The stock has given consolidation breakout on a weekly scale. This breakout is confirmed by the above 50-week average volume. In addition, it has formed a sizable bullish candle on breakout week, which adds strength to the breakout. Currently, it is trading above its short and long-term moving averages.
These technical factors are aligned in favor of bulls. Hence, we recommend accumulating the stock in the zone of 6150-6100 with a stoploss of Rs 5880. On the upside, it is likely to test the level of 6500, followed by 6750 in the medium term.
Reliance’s AGM was on Thursday. How do you view the stock following the update, and what is your assessment of its technical positioning?
Reliance Industries has strongly underperformed the frontline indices for the last couple of weeks. Currently, the Nifty is trading at an all-time high level, while Reliance is trading below its all-time high by over 5%. The ratio chart of Reliance as compared to Nifty is at 158 days low, which clearly shows underperformance.
Trent and BEL will be joining the Nifty 50 index from September 30. Do you have any recommendations for positions in these stocks?
Technically, Trent is in a strong uptrend. The 6850-6800 zone will act as immediate support for the stock. As long as it remains above the 6800 level,
Among popular stocks like Paytm, it hasn’t been an excellent year for the company. However, with the finance ministry’s approval for its payment services business, the stock might see some relief. Do you have any comments on this update and any recommendations for traders?
These averages have started edging higher, which is a bullish sign. Most noteworthy, the weekly RSI surged above the 60 mark for the first time after October 2023, a bullish sign.
Do you suggest any broader sectors to watch out for?
Technically, the IT, Pharma, Healthcare, Financial Services, and Telecom sectors are showing strong potential.
Would you like to recommend any stocks within or outside those sectors?
Technically, LTIM, NTPC, BAJAJFINSV, LAURUSLABS, LALPATHLAB, CIPLA, and CROMPTON look good for the short term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)