Benchmark indices Nifty and Sensex maintained their momentum, closing at record highs on Friday. This marked the Nifty’s best week in two months, extending its winning streak to 12 consecutive sessions.
The 30-share BSE Sensex rose 231 points, or 0.28%, to close at 82,365, while the broader NSE Nifty gained 84 points, or 0.33%, to end at 25,235. This is the third day in a row that the Nifty has closed at a record high.
Analyst Sudeep Shah, Senior Vice President and Head of Technical & Derivatives Research at SBI Securities, discusses the market outlook as well as specific stocks and sectors for the new series with ET Markets. Here are edited excerpts from their conversation:
The Nifty remains above the 25k mark, and analysts are confident that it will set new record highs in the near future. What are your thoughts on this?
In August, the Nifty saw significant volatility, with 12 trading sessions opening with either an up or down gap. Throughout the month, it has fluctuated over a range of 1300 points, underscoring the high volatility of the market. Despite this, the index reached an all-time high and closed the month above the psychologically significant level of 25,200. Most importantly, for the third month in a row, the index has ended positively. On a monthly scale, it has formed a bullish candle with a long lower shadow, which indicates buying interest at a lower level. The steady sector rotation has played an important role in supporting the market and maintaining the elevated level. During the month, Nifty IT, Nifty Pharma, and Nifty Healthcare have outperformed the frontline indices. We believe this sector is likely to continue its journey north in the next few trading sessions. Returning to the Nifty on Friday, the index has given a horizontal trendline breakout on a daily basis, which is a bullish sign. Momentum indicators and oscillators also support the overall bullish chart structure. Daily and weekly RSI are in super bullish zone according to RSI range shift theory. The daily MACD histogram suggests a pickup in upward momentum. In terms of levels, the index will test 25,600, followed by 25,800 in the short term. On the downside, support has moved higher to the 24,900-24,850 range.
When the August expiration was done and dusted, monthly OI data saw 52,000 call writers at 25,200 ITM strikes and then at 25,300 with 24,200 call writers. For put writers, the highest concentration is also at 25,200 followed by 25,100 strikes. How to read this data for the expiration of each month of September?
There is a concentration of call open interest at the 25500 strike, followed by the 25700 strike. While significant open interest on the other hand is observed at the 25200 strike, followed by the 25000 strike. As for the Straddle cost of the ATM strike, the range for the next few trading sessions is the 25477-24990 level.
For the weekly series, write the highest call at the level of 25,200, then 25,500. As the index traded above 25,200 for a significant part of Friday’s session, what is the significance of the 25,200 level?
Call writers may be hoping that the current market is overextended and may experience a pullback to 25,000 in the upcoming trading session. The strike price of 25,200-25,300 has the highest open interest for expiration this week. When accounting for the option premium, the risk for option sellers increases above the 25,400-25,430 range.
Despite opening well with the gap up, there has been no significant unwinding of the position, as substantial follow-up buying has been lacking. Therefore, significant short covering can occur if the Nifty can extend and sustain above the 25,400-25,430 range.
IT is doing well today at a record high, apparently unaffected by global sentiment. What are your thoughts on this?
On the weekly scale, Nifty IT gave breakout of stage-2 Cup pattern. The depth of the pattern is 34%, and the width is 131 weeks. 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 a consolidation breakout on the weekly scale. This breakout is confirmed by the 50-week average volume above. In addition, it has formed a fairly large bullish candle in the breakout week, which adds strength to the breakout. Currently, it is trading above the short-term and long-term moving averages.
These technical factors are aligned for the bulls. Therefore, it is recommended to accumulate the stock in the 6150-6100 zone 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 is on Thursday. How do you see the stock after the update, and what is your assessment of the technical position?
Reliance Industries has underperformed the frontline indices for the past few weeks. Currently, Nifty is trading at an all-time high, while Reliance is trading below its all-time high by over 5%. Reliance ratio chart compared to Nifty is 158 days low, which indicates poor performance.
Trent and BEL will join the good index of 50 from September 30. Do you have a recommendation for a position in this stock?
Technically, Trent is in a strong uptrend. The 6850-6800 zone will be immediate support for the stock. As long as it stays above the 6800 level,
Among popular stocks like Paytm, it has not been a good year for the company. However, with the finance ministry’s approval for the payment services business, the stock may be relieved. Do you have any comments on this update and recommendations for traders?
This average has started to rise, which is a bullish sign. Most importantly, the weekly RSI rose above the 60 mark for the first time since October 2023, a bullish sign.
Do you have any advice on the broader sector to watch out for?
Technically, the IT, Pharmaceutical, Healthcare, Financial Services, and Telecom sectors show strong potential.
Do you want to recommend stocks in or outside the sector?
Technically, LTIM, NTPC, BAJAJFINSV, LAURUSLABS, LALPATHLAB, CIPLA, and CROMPTON look good for the short term.
(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of Economic Times)
