After the Bell: Fresh highs for 3rd straight day. Here’s what investors should do on Friday?

Market Outlook

Bulls managed to push the index back in the green and to fresh record highs on Thursday even though benchmark indices started on a muted note.

The market hit fresh record highs for the third day in a row. The S&P BSE Sensex hit a fresh high of 54,717 and the Nifty50 rose to 16,349.

Let’s look at the final tally on D-Street – the S&P BSE Sensex rose 123 points at 54,492 while the Nifty50 gained 35 points at 16,294.

On the sectoral front, buying interest was seen in telecom, metals, energy, IT, and FMCG while selling pressure was seen in realty, public sector, and banks.

On the broader markets front – the S&P BSE Midcap index rose 0.10 percent, and the S&P BSE Smallcap index fell 0.43 percent – underperforming benchmark indices.

“Despite witnessing consolidation in the opening session, large caps managed to continue trading at record high levels with the support from IT, Metal and FMCG stocks,” Vinod Nair, Head of Research at Geojit Financial Services, said.

“Banking stocks continued to be under pressure ahead of the RBI’s policy announcement. Importantly, the broad market has started to underperform. Investors should be cautious in the short-term regarding the performance of mid & small caps after the thrilling rally during the year,” he said.

India VIX fell down by 2.55% from 13.21 to 12.87 levels. Stability in volatility indicates that bulls are holding the market to cheer the fresh momentum.

On the options front, the maximum Put OI is placed at 15000 followed by 15800 strikes while the maximum Call OI is at 16500 followed by 16000 strikes.

Minor Call writing is seen at 16700 then 16550 strikes while Put writing is seen at 16000 then 16200 strikes. Options data suggests a broader trading range in between 16000 to 16500 zones, suggest experts.

Here’s what experts suggest investors should do on August 6:

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

The Nifty50 witnessed follow-up buying for the most part of the session even after a dull move in Bank Nifty and closed the session with the gains of 35 points.

The index formed a Doji sort of candle with longer shadows on both the side on a daily scale but continues the formation of higher highs – higher lows from past six sessions. Now, Nifty has to hold above 16200 zones to witness an up move towards 16400 then 16500 zones while on the downside support is seen at 16150 then 16000 levels.

Rohit Singre, Senior Technical Analyst at LKP Securities.

The Nifty50 formed dragonfly Doji candle pattern on the daily chart which represents indecision in the markets. Going forward, 16300 will act as a resistance level, and it manages to hold above the same then we may see the index march towards the 16,400 zone.

If it fails to manage then some profit booking may be seen towards 16200-16100 zone which are immediate supports on downside & overall support is placed at 16,000 mark nay dip near 16,000 mark will be a good buying opportunity.

Rahul Sharma, Co-Founder, Equity99.  

Banks will be in focus on Friday as RBI will announce Monetary Policy. Apart from banks, other sectors that will be in focus are Metals, Real-Estate, Automobiles & Telecom. Important results to watch out for are – AU Small Finance Bank, Berger Paints, M&M, Muthoot Finance, NALCO, SAIL, Tata Power & ZEEL

Nifty on Technical Daily Charts indicates very strong momentum. We can see 6 bullish candles consecutively with higher top higher bottom formation. For Friday, the Nifty has immediate support at 16260 followed by 16220 & major support 16150.

Similarly, with closing at 16294, the next resistance is placed at 16330 followed by 16385 & 16450 as the third major resistance.

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas

The Nifty witnessed swings in both directions on August 05. It attempted to stretch higher today however couldn’t go too far & ultimately formed a Doji pattern on the daily chart.

This shows that the index is consolidating its gains after the recent run-up. This is allowing the overbought momentum indicator on the hourly chart to cool off.

The Nifty is expected to trade near 16200-16300 over the next couple of sessions & post this brief consolidation the index is expected to head higher.

On the higher side, 16400 & 16800 will continue to be the short-term & medium-term targets respectively. On the downside, a gap area formed on the daily chart recently i.e. 16176-16146, will act as short-term support.

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