Nifty: Nifty on a strong base, to maintain bullish trend: Analysts

Technical charts suggest a sideways-to-positive outlook from a broader market perspective. The Nifty has established a strong base around 21,450 levels, and a sustained position above this level is likely to favour the bullish trends, according to analysts. Stocks, including Infosys, Persistent Systems, Torrent Pharma, Medanta, APL, NMDC, and Hindustan Petroleum have formation of long patterns on the charts.

Where is the Nifty headed?
After reaching a lifetime high at 22,124, the Nifty experienced a dip and found support at 21,350-21,400, which aligned with the 26-day exponential moving average, thereby establishing this as a crucial support. The overall trend in the index remains positive as long as the support at 21,350 is maintained. FII net short at the beginning of the January series was 30%, which has now grown to 54%, illustrating the surge in shorts. Also, the RSI, currently hovering around 50, suggests a certain lag in momentum. This is notable as the recent decline in the index, predominantly because of HDFC Bank, appeared polarised, with fewer counterparts contributing to the fall. Hence, we expect the index retains the potential for an upward movement, reaching as high as 22,000.

What Should Investors Do?
There is noticeable strength in the broader markets indicating the potential for sustained momentum in the near future. Sectors that could outperform include IT, pharma, metals, and oil & gas. Stocks to closely monitor include Infosys, Persistent, Torrent Pharm, Medanta, APL, NMDC, FACT and HPCL. Conversely, stocks that might exhibit underperformance include Max Financial, Bata, and Berger Paints


Where is Nifty headed?
In three months, Nifty has moved up by 17%, but, from the last five weeks the index has inched up 5% with high volatility. It has formed a strong base at 21,450 levels. Sustainability above the mentioned support level will favour bulls. On the higher side, the index has resistance at 21,850, followed by 22,100. The broader view for the market remains sideways-to-positive. From a strategic index perspective, Nifty Alpha 50, smallcap and microcap, are the flavour of the market. Going forward, Nifty seems to be volatile in the range of 21,500 to 21,800 level, but stock-specific action from mid- and small-cap stocks is likely to continue.

What should investors do?
CPSE stocks are likely to remain in bullish momentum, while underperformance can be observed in the auto sector and FMCG. Bullish momentum can be seen in NMDC, Bank of Maharashtra, and FACT, whereas a short view can be formed in Ashok Leyland, Bata and Escort.


Where is the Nifty headed?
The index witnessed a sharp correction and, in the process, has violated the higher top, higher bottom formation, which indicates trend reversal as per the Dow Theory. If Nifty consolidates in 21,810 – 21,300 range during the week, then the index will be forming “Wave D” of the Ending Diagonal pattern, which started from the low of 20,769 of Dec 2023. The other scenario is that the counter-trend pullback that is currently going on shall fizzle out in the zone 21,706 – 21,810 and start the next leg of fall towards 20,960, which is the equality target. Under both scenarios, the upside seems to be limited from the current levels, and hence, the bounce should be used as a selling opportunity.

What should investors do?
This is a stock-pickers’ market. Sectorally, PSU banking, IT, and pharma indices can witness buying interest, while financial services, FMCG, media and realty can witness profit booking. Buy L&T at Rs 3,634 with a stop loss of Rs 3,530 for a target of Rs 3,750-3,800. Buy Coal India at Rs 398 with a stop loss of Rs 383 for the target of Rs 416-425. Sell DLF February Future at Rs 784 with a stop loss of Rs 796 for the target of Rs 760-732.

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