Banking counters holding Nifty back: Sameet Chavan of Angel Broking

From the high touched on April 30, the Nifty has not even retraced 50 per cent but the Bank Nifty has corrected slightly over 78 per cent.

Nifty holds 9000 despite some hiccups
 

We had a positive start last week, citing the cheerful mood in Asian markets and a good bump up in Dow Futures early in the morning. However, it was merely a formality as we saw markets taking a complete nosedive in initial trades. Within a blink of an eye, we not only broke the sheet anchor of 9,000 but also hastened towards the 8,800 mark. After seeing such a knock, markets recovered gradually throughout the remaining part of the week. However, due to some sell off post the ad hoc press conference by RBI on Friday, markets came off a bit from the morning highs. Fortunately, the damage at the close was not so big and hence, Nifty concluded the week with a marginal cut of a percent. 
 

The most tracked and tradable indices, Nifty and Bank Nifty have shown some diverging moves in the last few weeks. In fact, in the week gone by, Nifty corrected by merely a per cent, whereas the banking index plunged over eight per cent. If we look at the recent corrective move from April 30 high, the Nifty has not even retraced 50 per cent but the Bank Nifty has corrected slightly over 78 per cent. Looking at these observations, it is very much clear that the banking space has been the pain point and hence, it is not letting our markets move northwards. Now as far as levels are concerned, we were seeing 9,000 as a key support but after seeing breakdown on Monday, we remained a bit sceptical due to formation of contradictory patterns on an hourly chart. Our scepticism proved correct as we saw Nifty immediately reclaiming the 9,000 mark on a weekly closing basis. So hopes are still alive for the bulls, unless there is some aggravation with respect to US-China tensions or any other thing related to the Coronavirus pandemic.
 

For this week, all eyes would be on global markets and at our end, 9,200 is the level to watch out for. Also, Any rally which is mainly driven by the banking space is considered to be a robust one and hence, if we manage to reclaim 9,200 along with the considerably higher contribution from the banking conglomerates (Bank Nifty hourly chart depicts a positive divergence in RSI-Smoothened), we would see good relief move in the concluding week of the May month. On the flipside, 8,900 – 8,800 would be seen as crucial supports for the market.

Stock recommendations:
 

NSE Scrip Code – CIPLA

View   –    Bullish
 

Last Close   –   Rs. 636.60
 

The entire PHARMA space has been the flavor in last couple of months. Most of the counters have given a stupendous rally of more than 30-40% in such a short span. Last month we had highlighted the ‘Nifty Pharma’ confirming a breakout from multi-year ‘Downward Sloping Channel’ and although, this month mostly has been the consolidation phase, we expect the stocks to resume their upward trajectory now. ‘CIPLA’ went into a consolidation mode after a stellar move and since last couple of days, it has regained momentum. In this process, the daily chart now exhibits a breakout from the ‘Bullish Flag’ pattern and considering the overall placement of momentum oscillators, the stock is likely to do well in next few days. We recommend this stock for a target of Rs.688 in coming weeks. Traders can keep their stop losses at Rs.608.

NSE Scrip Code – INDIAMART

View   –   Bullish
 

Last Close   –   Rs.2539.85
 

This e-commerce company has been quiet since last three months and it is important to note that, this stock refused to correct severely in the March month mayhem that the broader markets witnessed. In fact, after correcting a bit, the stock prices started gradually moving northwards and, in the process, has confirmed a breakout from the ‘Bullish Cup and Handle’ pattern.  The said breakout is supported by higher volumes and we expect the outperformance to continue. Hence, we recommend a buy at current levels for a target of Rs.2720 over the next 14 sessions. The stop loss should be fixed at Rs.2395. 

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Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The author may have positions in one or all of the above mentioned stocks. Views are his own.