Nifty IT and Nifty Bank singing different tunes. How to trade?

Chief Market Strategist Anand James

A plunge in Nifty Bank last week has enabled index constituents to regroup, and appears to have placed the index better poised to swing higher, potentially aiming 49,000, a 7% upside potential from here, says Anand James, Chief Market Strategist, Geojit Financial Services. Edited excerpts from a chat:

1) Following the buying seen on Friday, how does the Nifty chart look like for monthly expiry ahead? How strong is the support at around the 21,300 level?

For a while last week, Nifty appeared to fall off a cliff, before bulls and bargain hunters mustered enough courage to stage a defence at the 21300 region and succeeded in ending the week on an even keel. However, my sense is that it is not the 21300s that will be in focus next week, as much as 21800, as it would test the strength and conviction of the buyers that have participated in the bounce off 21300. We will however, open the week on a positive note, hoping to ride on the morning star candlestick formation, which though appears diluted by Friday’s doji. And yet, we do not feel confident enough to climb back on the 22240-22400 trajectory that we had been following for the last fortnight. We will revisit this construct once we see a day or two above 21800, while favoured view expects a sideways move at best, or a slow drop to the 20900 vicinity.

2) The negative co-relation between Nifty Bank and Nifty IT was evident in the week. Do you see the tables changing as the selloff in HDFC Bank stock has been contained?

Nifty IT and Nifty Bank have been singing two different tunes obviously. IT running on general earnings optimism as well as benefitting from the tail wind, having come off a long term downtrend. Nifty Bank meanwhile saw price action finally catching up with the analysts estimates for NIIM compression that were available at the start of January itself, even though it required HDFC Bank to finally tip the scales. However, the plunge has enabled the index constituents to regroup, and appears to have placed the index better poised to swing higher, potentially aiming 49000, a 7% upside potential from here. Downside marker may be placed near 45000.

3) Rail stocks are once again in the limelight ahead of the Budget. IRFC went up 50% in the week while RVNL was up 43%. What would be your trading strategy?
Potential for further capital expenditure into the sector has fuelled the stocks as elections approach. These two stocks however, have been on the ascent since the mid of last year though. Both of them have attracted heavy volumes, and they have not sporadic enough suspect a quick turn. However, it appears too late in the day, to enter the rally, but I would hold on to them for a trifle longer, if I had them. Downside markers may be placed at 140 and 260 for IRFC and RVNL respectively.

4) Give us your top ideas for the week ahead.


View             :        Buy

Targets         :        605 – 635

Stoploss        :        564

After staying within a narrow range since the beginning of this month, the stock has broken out of the range forming a candle resembling a Bullish Marubozu. The MACD has broken above the signal line in the daily charts hinting more upsides for the stock in the near term. We expect the stock to move towards 605 and 635 in the next few weeks. All longs may be protected with stoploss placed below 564.

IRCTC (CMP: 983)

View             :        Buy

Targets         :        1050 – 1130

Stoploss        :        935

The stock has been in an uptrend since March 2023 has been making higher tops and higher bottoms holding itself above the 50, 100 and 200 DSMAs. After a minor pull back last week, the stock took support around its 20 DMA of 737. It has formed a Bullish Marubozu candle on daily charts hinting at more upsides in coming weeks. We expect the stock to move towards 1050 – 1130 levels in the next few weeks. All longs may be protected with stoploss placed below 935.

First published in The Economic Times


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