By Rajesh Palviya
Nifty started the week with a downward gap and witnessed a pullback rally in the initial half however selling pressure in the second half dragged the index lower to end on a negative note. Nifty closed at 18269 with a loss of 228 points on a weekly basis. On the weekly chart the index has formed a Bearish candle with an upper shadow indicating selling near 18700 level. Index options PCR is at 0.81 v/s 0.76 & F&O Total PCR is at 0.97. Nifty Put options OI distribution shows that 18000 has highest OI concentration followed by 18400 & 18300 which may act as support for current expiry. Nifty Call strike 18600 followed by 18400 witnessed significant OI concentration and may act as resistance for current expiry.
Bank Nifty Outlook
Bank Nifty started the week with a downward gap and traded with extreme volatility throughout the week to close on a negative note. Bank Nifty closed at 43220 with a loss of 414 points on a weekly basis. On the weekly chart the index has formed a Bearish candle with a long upper shadow indicating selling at higher levels.
The chart pattern suggests that if Bank Nifty crosses and sustains above 43400 level, it would witness buying which would lead the index towards 43600-43900 levels. However, if the index breaks below 43000 level, it would witness selling which would take the index towards 42700-42500. For the week, we expect Bank Nifty to trade in the range of 43900-42500 with mixed bias. The weekly strength indicator RSI is quoting above its reference line indicating positive bias in the medium term. However, daily RSI is moving downwards and is quoting below its reference line indicating profit booking in the short term.
Sectors and stocks to watch
We expect sectors like Fertilizer, Sugar, FMCG, Banking, and Capital goods to show bullishness in coming trading sessions. One can focus on stocks like RCF, National Fertilizers Limited (NFL), Balrampur Chini Mills, Renuka Sugar, L&T, Siemens, Au Small Finance Bank, HDFC Bank likely to show bullishness in coming sessions.
Nifty Strategy
This week, traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called BULL CALL SPREAD of 22 December Expiry wherein traders can buy one lot of 18,300 call strike at Rs 99 and simultaneously sell one lot of 18,550 call strike at Rs 25, so that net outflow or maximum loss will be restricted to up to Rs 3,700. Nifty on expiry if closes above the breakeven point of 18,374, the strategy will start making profits. The maximum gains will be restricted up to Rs 8,800; because the gains of long 18,300 strike call will be offset by the sold 18,550 strike call if Nifty closes above 18,550 on expiry.
(Rajesh Palviya, Vice President – Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)