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#39;Bank Nifty to continue its outperformance, needs to hold 27,400 to extend gains#39;

January 14
01:28 2019

Chandan Taparia

Motilal Oswal Financial Services

The Nifty formed a bearish candle on the daily scale on January 11 while a small ‘Doji’ candle on the weekly scale which indicates indecisiveness as follow up is missing on both the side in the market. It has been flirting with its 50-DEMA and has continued its alternative positive and negative weekly close for the ninth week.

Now it has to continue to hold above 10,750-10,777 to witness an upmove towards 10,880 and then crucial hurdles at 10,925-10,985. It has been facing hurdle at its immediate supply trendline that connects swing highs of 10,985, 10,923 and 10,880.

It requires a decisive range breakout to commence the next leg of the rally. On the downside, if it fails to hold 10,720 then only we can see dips towards 10,650-10,600.

Nifty has got stuck in the grip of option writers and follow up is missing on both sides as index traded in a range of 10,730 to 10,870 in the last five sessions. India VIX fell 5.01 percent at 15.35 in the last week and started to hold below 16 that could attract buying interest on declines.

For Nifty options, maximum Put open interest (OI) is at 10,000 followed by 10,500 strikes and maximum Call OI is at 11,000 followed by 11,200 strikes. Call writing was seen at 11,000 followed by 10,900 strikes while Put unwinding is seen at most of the immediate strikes.

Derivatives setup suggests support of 10,700-10,730 could provide comfort to bulls but intact Call writing at 11,000 and 10,900 strikes are going to restrict its momentum.

Bank Nifty negated its higher highs formation on the daily scale but managed to hold above 27,350-27,400 zone. It formed a bearish candle on daily scale, but forming higher highs-higher lows on weekly scale.

Now it has to continue to hold above 27,350-27,400 to extend its gains towards 27,750 and then 28,000. On the downside, support exists in 27,150-27,000 zone. We expect Bank Nifty to continue its outperformance.

We are positive to rangebound on Bank Nifty till it holds above 27,000 whereas, have a rangebound bias on Nifty index till it doesn’t surpass 10,925-10,985 zone decisively.

Stock-wise, we are positive on ITC, Axis Bank, UPL, ICICI Bank, SBI, DCB Bank, Biocon, and Torrent Pharma.

The author is Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited.

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