Consolidation breakout can take Nifty to 23,400: Analysts

Where is Nifty headed this week?
Nifty has recorded a breakout from three months of consolidation backed by faster retracement as it entirely retraced the past nine weeks of consolidation (22,800-21,700) in just two, exhibiting a robust price structure that bodes well for an extension of the ongoing up-move towards our target of 23,400. Multi-sector participation backed by improving market breadth, robust price structure of global markets and lower Brent prices are expected to act as tailwind.

What should do?
We expect to remain high as we approach the end of the general elections coupled with the Q4 earning season. Focus should be on the big picture, as we are in a structural uptrend. The anxiety will subside after the event and the market will follow its structural up-trend. Retracements would provide buying opportunities, and investors should focus on building portfolios and ride the as immediate support is at 22,400. Sectorally, BFSI, PSU, capital goods and infra, metal, consumption, and energy would remain in focus. On the stock front, in large-caps, we prefer Reliance, SBI, L&T, Tata Power, Tata Steel, HUL, Cipla, and Coal India looks good for 6-9% upside. In midcaps, HPCL, Sona BLW Precision Forgings, JSW Energy, Granules, JK Cement, Whirlpool, JSL, Ircon, KNR Construction, AB Capital looks good for 12-15% gains.

Agencies

RAJESH PALVIYA
HEAD TECHNICAL DERIVATIVES, AXIS SECURITIES

Where is Nifty headed this week?
On the weekly chart, the index has formed a long bullish candle with higher high-low compared to the previous week, and has closed above the previous week’s high, indicating a positive bias. The index is moving in a higher-top and higher-bottom formation on the daily char. If Nifty crosses and sustains above 23,200, it would witness buying, leading the index towards 23,400-23,500 levels. However, if it breaks below the 22,800, it would witness selling, taking the index towards 22,600-22,500.

What should investors do?
We expect stocks like BEL, Ashok Leyland, TVS Motors, HDFC Bank, REC, Chambal Fertilizer, Aurobindo Pharma, GAIL, BPCL, L&T, and Bharat Forge to do well. Traders can initiate a moderately bullish strategy with reduced premium outflow and a lower break-even point called Bull Call Spread of May 30 monthly expiry wherein the they will buy one lot of 23,000 Call strike at Rs 163 and simultaneously sell one lot of 23,400 Call strike at Rs 28 so that net outflow or maximum loss will be restricted to up to Rs 3,375. If Nifty on expiry closes above 23,135, the strategy will start making profit. However, as the risk is limited, so is the profit. The maximum gains will be restricted up to Rs 6,625 only because the gains of the long 23,000 strike Call will be offset by the sold 23,400 strike Call if Nifty closes above 22,400 on expiry.

APURVA SHETH
HEAD OF MARKET PERSPECTIVES & RESEARCH, SAMCO SECURITIES

Where is Nifty headed this week?
Nifty managed to break out after several weeks of sideways consolidation in the range of 21,800 to 22,800. The index slipped lower after crossing the psychological mark of 23,000, indicating some profit booking at higher levels. It is likely to face resistance around the 23,000 as Call-andPut writers slug it out to establish supremacy ahead of the election. A dip towards 22,800 can be used as a buying opportunity in the index.

What should investors do?
Bank Nifty is a laggard out of the two indices. It is down by about a percent in May while Nifty is up by 1.53%. Bank Nifty can catch up in the last week of May and touch new highs. Traders can look for long opportunities in Bank Nifty at current levels, with a stop loss at 48,500 and a target of 50,000. Midcap stocks like RCF, Tata Tech, Tata Elxsi, Blue Dart and Bharat Forge can be on the radar for short-term trades.