Half of Nifty Bank constituents above 50-DMA. Anand James on how to trade this week

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Nifty ended the month 2% stronger despite all the negative news surrounding rising crude, bond yields and dollar index. Given the fact that FIIs are having $733 million short position in index futures, where do you see the index going in October which is known as ‘Bear Killer’?

FIIs have ramped up their index future shorts, which now constitute 27% of shorts in the segment across participants. Also, the short to long proportion of positions by FIIs has tested 70%, a historically high figure. However these figures needs to be seen in perspective of the total OI of shorts, which is still lesser than that visible at the start of September. Also, we saw shorts at an extreme in late July, post which an uptrend was seen. Incidentally, October is historically a good month for Nifty, and the high amount of shorts, present an ideal set up for reversals. With Nifty, 19420/320 region stands in the way of an 18600, what last week’s sharp decline almost promised. However, Friday’s inside bar encourages us to look at the prospects of revival, and a run beyond 20000, if a close above 19780 is managed.

2) It looks like till HDFC Bank starts inching upwards, it would be nearly impossible for Nifty Bank to sustain positive momentum. Would you be comfortable shorting the stock as well as the banking index in the October series?
Our default view on HDFC Bank is to look for extended declines, aiming 1370-20. However, given the slow down in downside momentum, last week, we are weighing the prospects of a recovery attempts being made while inside the 1525-1460 region. Any outright push above 1570 could also serve to lessen the heavy bearish bias the stock has been bearing lately. That said, the prospects of a vertical rise looks low. Meanwhile, more than 50% of Bank Nifty constituents are still above 50DMA, suggesting that the index could find new leaders. Also the Bank Nifty index appears due for a bounce back, but we would be first interested in initiating shorts on pull back to 45000. However, we feel that, after due consolidation, the latter part of October could see a breakout beyond this region.  

3) Tata Investment Corporation has surprised with a 26% plus rally in the last one week amid news related to IPO plans of Tata Capital. How are the charts looking like for the week ahead?
Tata Investment has been on a steady rise since March, but it set off on a vertical ascent after breaching the August peak. The second half of September has also seen volumes rise to the highest in a year. Oscillators now appear stretched and a mean reversion move is likely. We might consider a new entry only on seeing declines into the 3120-2970 region.

4) Nifty PSU Bank was the top sectoral performer in the week. Do you see signs of an impending profit-booking amid overbought levels? Which are the PSU bank stocks one should stay away from in the current level?
The sector as such looks quite bloated, and vulnerable to consolidation, but an outright exit from current positions may not be recommended, as it would make re entry difficult. Expect a time correction than that a steep fall.

5) Give us your top stock picks for the week ahead.


View            :         Buy

Entry range  :         346 – 357

Targets         :        374 – 390

Stoploss        :        330

The stock has been moving within a downward sloping channel since 2021 and has managed to close above the pattern resistance in the weekly time frame. Also, in the monthly periodicity, the stock has formed a Marubozu candle and the MACD is about to cross the signal line hinting at positive outlook for the stock in the short to medium term. We expect the stock to move towards 374 and 390 in the next few weeks. All longs may be protected with stoploss placed below 330.


View            :         Buy

Entry range  :         393 – 386

Targets         :        405 – 420

Stoploss        :        370

After declining from August highs, the stock has formed a Dragonfly Doji candle in weekly time frame and has seen MACD breaking above the signal line in the monthly time frame along with above average volume this week hinting at positivity. We expect the stock to move towards 405 to 420 levels in the coming few weeks. All longs may be protected with stoploss placed below 370 levels.

First published in The Economic Times


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