CHANDAN
DERIVATIVE ANALYST,
Where is the Nifty headed?
The Nifty has temporarily bottomed out recently with the support of 15,735 zones but has been facing multiple hurdles near 16,400 zones from the last 14 trading sessions. Indicators like RSI (relative strength index) and MACD (moving average convergence divergence) have turned higher from their oversold territory giving some scope for a decent bounceback move from current zones. India VIX has been falling over the last three trading sessions and corrected from a high of 25.99 to 21.50 zones. Falling VIX indicates some bounce, but overall higher VIX indicates that the rollercoaster ride could continue in the Indian market. The market is reacting more to global indices and any change in price sentiment in DJIA, S&P500 and Nasdaq could give a trigger. Nifty has to hold above 16,250 zones for an up move towards 16,666 and 17,000 zones whereas supports are placed at 16,161 and 16,061 zones.
What should investors do?
Investors can use the declines to add good quality stocks from the banking, financial and auto sectors while traders are suggested to play with bounceback moves along with work on position sizing to deal with this volatile market stance. One can go with a bull call spread by buying 16,400 Call and selling 16,700 Call to play the bounce towards 16,666 zones. Stock-specific positive stance in , , , , HDFC, , Mahindra & Mahindra, etc.
RAJESH PALVIYA
HEAD-TECHNICALS & DERIVATIVES, AXIS SECURITIES
Where is the Nifty headed?
On the weekly chart, the index has formed a bullish candle with a long lower shadow indicating buying at lower levels. Nifty managed to cross above the 20-day simple moving average, which indicates near-term strength and improving sentiment. Nifty and Bank Nifty futures witnessed short covering action, India VIX also cooled off and came back to 21.50 level indicates Nifty likely to show more pullback action in the coming week. The chart pattern suggests that if the Nifty crosses and sustains above the 16,400 level it would witness buying which would lead the index towards 16,600-16,800 levels. However, if it breaks below 16,100 level it would witness selling which would take the index towards 15,800- 15,600. For the week, we expect a range of 16,600-16,000 with a positive bias.
What should investors do?
We expect the automobile, banking, FMCG and pharma sectors likely to exhibit bullishness in the near term. We may witness some short covering/pullback action in the IT sector in the near term. For the weekly expiry dated June 2 we suggest a moderately bullish strategy called call ladder, which involves buying one lot of Nifty 16,350 Call at `153 and selling one lot each of 16,500 Call at `86 and one lot of 16,650 Call at `42. The cost involves an outflow of `1,250 which is the maximum loss if Nifty remains below 16,375 levels on expiry. The maximum profit of `6,250 will be attained above 16,500, while loss will accrue if the Nifty crosses 16,750. It’s advisable to exit in total to avoid unlimited losses above 16,750. The Breakeven points are 16,775 and 16,375.
ABHILASH PAGARIA
HEAD-EDELWEISS ALTERNATIVE AND QUANTITATIVE RESEARCH
Where is the Nifty headed?
The double-bottom support of 15,735 has held itself for the third week in a row. The current rebound can lead the Nifty to 16,650. The strong supports are placed at 16,150 and 16,050 levels. We expect the trading range to continue to stay wider than usual.
What should investors do?
In terms of sectors as per our quant models, the auto index holds a good chance to outperform against the broader markets. Auto stocks should stay resilient in times of any weakness and medium-term traders can look to add
as a long bet. As per our models, the banking index too can gain 2.5-3% and around 37,250 levels should be used as an opportunity to short with a 2% stop loss. The realty index can outperform the broader index while any meaningful gains in the IT index should be used to build temporary shorts.
