Mr. Mustafa Nadeem, CEO, Epic Research
Nifty ends up the week for the second time extending the gains and closing on a strong note at 11360 after making a fresh all-time high of 11390. Momentum kicked in as the Nifty bank continued its outperformance on the back of buying in Private banks and accumulation in PSU banks from lower levels. The heavyweights continue to outperform and lead the market with an overall contribution of 60%-70% in Index. A surge in PSU banks backed by PSU heavyweight SBI along with continued momentum in PVT banks has further sparked up the directional play in Nifty for a higher trajectory.
Frontliners, FII, and momentum are the few factors that we are seeing in equity markets right now. Overall scenario Technically is very strong and is in favor of the bulls and directional players. This is a classic bullish rally which is lead by frontliners/heavyweights on the back of accumulation. The earnings have been good and as per expectations while the growth expected in coming quarters is expected to be in double digits (Except PSU banks). The buying in the market was contributed majorly by HDFC, AXIS, ITC, ICICI, KOTAK, Reliance, and TCS. In numbers, its around 70% contribution by these frontliners. This is technically happening since 10500 levels and post its breakout and increase in momentum we have seen it building up aggressively. That is also reflected in breadth as well as Derivatives data. 10400 to 10450 is a zone of resistance since there are multiple confluences in terms of resistance but any pullback in this market is being bought aggressively. So a breather may happen but the momentum may continue towards a higher target of 11500 - 11600
The global markets are seeing mixed cues on the back of escalated trade war while another rate hike indication by Fed reserve has further pulled some string in Asian markets. A positive momentum despite global uncertainty makes it more concrete for short term to medium term. Derivatives data suggest a range expansion is in play with higher strikes at 11500 - 11600 seeing a fresh addition in long built up while writing is seen shifting from 11200 to 11300.
The support which was previously seen at 11150 - 11200 seems to have formed in recent correction at 11250 - 11240 while the upside is now seen towards higher targets of 11450 to 11600. Focus remains in the large caps and blue chips that are leading the momentum and directional play on the long side is advised in same stocks.
We would suggest utilizing any dips that are more than a percent in broader indices. A recent correction towards 10300 was seen and if we are able to sustain this for a second consecutive day we suggest to create/hold the long position for next target of 11450 - 11500. A close above 11450 would confirm us for an extension to 11600. 11250 Being the stop loss.