By Rajesh Palviya
Nifty started the week on a flat note and witnesses a buying momentum for most part of the week that led the index to close on a positive note. Nifty closed at 18105 with a gain of 299 points on a weekly basis. On the weekly chart, the index has formed a bullish candle and remained restricted within previous week’s High-Low range indicating lack of strength on either side. The chart pattern suggests that if Nifty crosses and sustains above 18300 level it would witness buying which would lead the index towards 18500-18800 levels.
Bank Nifty Outlook
Bank Nifty started the week on a flat note and buying momentum, for the most part of the week, led it to close on a positive note. Bank Nifty closed at 42986 with a gain of 1318 points on a weekly basis. On the weekly chart, the index has formed a bullish candle and remained restricted within previous week’s High-Low range indicating lack of strength on either side.
The chart pattern suggests that if Bank Nifty crosses and sustains above 43300 level, it would witness buying which would lead the index towards 43600-43800 levels. However, if the index breaks below 42700 level, it would witness selling which would take the index towards 42500-42300. For the week, we expect Bank Nifty to trade in the range of 43800-42300 with mixed bias. The weekly strength indicator RSI and momentum oscillator Stochastic have both turned flat indicating the absence of strength on either side.
Sectors and stocks in focus
We expect sectors like Fertilisers, PSU Banks, Capital goods, Real Estate, Housing Finance and Metals to well this week. One can focus on stocks like Chambal Fertiliser, Coromandal, L&T, Canara Bank, State Bank of India (SBI), Oberoi Realty, Sobha, PNB Housing, CanfinHome, Tata Steel, Jindal Steel & Power.
Nifty Strategy for the week
This week, traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called BULL CALL SPREAD of 5 January Expiry wherein a trader can buy one lot of 18,150 call strike at 102 and simultaneously sell one lot of 18,400 call strike at 26, so that net outflow or maximum loss will be restricted to up to Rs 3,800. Nifty on expiry if closes above the breakeven point of 18,226, the strategy will start making profits. The maximum gains will be restricted up to Rs 8,700; because the gains of long 18,150 strike call will be offset by the sold 18,400 strike call if Nifty closes above 18,400 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.)