After The Bell: Banks push markets to fresh highs, what should investors do on Thursday?

Market Outlook

Indian markets touched new highs for the second day on August 4, supported by a smart rally in banking and financial stocks, with the Nifty hitting 16,290 and the Sensex 54,465 during the day.

The Sensex closed 546 points higher at 54,369, while the Nifty50 rose 128 points to end at 16,258.

On the sectoral front, buying was seen in banks, finance, as well as power stocks, while profit booking was visible in telecom, realty, consumer durables, and FMCG stocks.

The Bank Nifty opened gap up and inched to 36,200 after a range breakout. It surpassed its resistance zones to close at 36,028, up 820 points.

On the broader markets front, the S&P BSE midcap and smallcap index fell 1 percent each, underperforming the benchmark indices.

“Domestic market extended its rally as banking and finance stocks started to rebound after good recent earnings, upbeat economic data and in anticipation of RBI policy,” Vinod Nair, Head of Research at Geojit Financial Services, said.

“Market is expecting MPC to maintain supportive measures and leave the rates unchanged,” he added. The Reserve Bank of India’s monetary policy committee (MPC) began its two-day meeting on August 4.

India VIX fell 3.91 percent from 13.74 to 13.21 levels. Stability in volatility indicates that bulls are in control.

On the options front, the maximum Put OI is placed at 15,800 followed by 16,000 strike, while the maximum Call OI is at 16,500 followed by 16,000 strike. Options data suggests a broader trading range of 16,000-16,600.

Here’s what experts suggest investors should do on August 5:

Chandan Taparia, Vice President | Analyst-Derivatives, Motilal Oswal Financial Services

The Nifty continued its positive momentum after the recent range breakout and has rallied around 400 points in the last two sessions. Buying interest supported the bulls at higher zones and the index closed the day with gains of 130 points.

It formed a bullish candle on a daily scale and formed higher highs, higher lows for the fifth session in a row. Now it has to hold above 16,150 to witness an up move towards 16,400 then 16,500 zones ,while on the downside, support is seen at 16,100 then 16,000.

Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments

The markets got off to a flying start but decided to take a breather close to 16,300. If it gets past 16,300, the next target should be 16,600.

The new support for the Nifty is at 15,700. Any dip or intraday correction can be used to accumulate long positions for higher targets.

Sumeet Bagadia, Executive Director, Choice Broking

Technically, the Nifty is shining after a breakout of resistance at 15,962. Overall, the index is trading above Upper Bollinger Band & Ichimoku Cloud formation, which suggests a long upward move in the counter.

Momentum indicators RSI and MACD are showing positive strength. Stochastic is also trading higher with a positive crossover on the daily chart, which indicates a bullish move.

The support for the Nifty has shifted to 16,100, while resistance may come around 16,400.

Rohit Singre, Senior Technical Analyst, LKP Securities

The Nifty stood tall for the second consecutive day after giving an ascending triangle breakout on the daily chart and closed the day at 16,259 with gains of nearly a percent.

The index has formed immediate resistance near 16,300, which needs to be crossed decisively or we may see some profit booking towards the immediate support zone of 16,180-16,090. Any dips will again be a buying opportunity as long as the index holds above the 16,000-mark.

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