F&O Talk | Nifty internships pullback but lacks conviction; Trend depends on banking, the revival: Sudeep Shah

Indian stock -benchmarks have completed the week on a solid note, stimulated by strong domestic macro -economic data and current policy reforms. The Nifty won 1.29% to settle at 24,741, while the SENSEX 1.13% climbed to close at 80,710. The upward trend was wide, with midcap and smallcap indices that perform better, respectively by 1.8% and 2.5% rise-a clear signal of rising risky appetite despite persistent global headwind.

Investor sentiment was canceled by the GDP -BBP growth of India of 7.8%, the fastest in five quarters, which strengthened the resilience of the economy. Policy momentum also played a key role, in which the switch from the GST Council tax plates streamline up to 5% and 18% that adds clarity and optimism in cyclical sectors is fed.

High-frequency indicators underlined the positive trend: the production of PMI rose to 59.3, a 17-year-old high point, while Services PMI jumped to 62.9, which marked the highest level in 15 years. On the external front, the shortage in the current account narrowed to 0.2% of GDP and the inflow of the FDI shares ~ 15% JOJ grew into Q1, which is a reflection of external stability and investor confidence.

With this, analyst Sudeep ShahVice -president and head of technical and derivatives research SBI effectsInteraction with ET markets with regard to the prospects for Nifty and Bank Nifty, as well as an index strategy for the coming week. The following are the edited fragments from his chat:

Markets did not perform so well after the GST 2.0 reform. Why do you think that’s?

The Benchmark index Nifty remained very volatile last week, in which all five trade sessions open with a gap-up or gap-down-it reflecting increased uncertainty in market sentiment. In addition to the irregular openings, the index often returned sharply from Intraday highlights and lows, so that a challenging environment was created for traders and to keep market participants on the outskirts.

From the recent low point of 24404, Nifty organized a pullback rally in the midst of continuous volatility and managed to end the week in a positive tone. On the weekly graph it formed a bullish candle with a long upper shade, which points to sales pressure at higher levels despite the recovery. Technically, the index acts above its EMA of 100 and 200 days, suggesting that the wider long -term trend remains intact. However, it oscillates in the vicinity of his EMAs of 20 days and 50 days, pointing to indecision in the short to medium term.

In particular, all these important advancing averages are currently flat, which usually indicates a phase of consolidation or lateral movement. This display is further supported by momentum indicators and oscillators such as RSI and MacD, which also reflect a lack of clear direction, which strengthens the expectations of access -related action in the short term.

Bank and IT sectors have the highest weight in the handy index, making their performance crucial for the general market feature. Unfortunately, both sectors are under -performance and they act as a resistance to the index. Weakness in IT shares and muted momentum in bank stocks have closed the upward potential and contributed to the continuous consolidation. A revival in these sectors will be the key for every persistent bullish momentum.

Speaking of crucial levels, the zone of 24950-25000 is expected to act as a strong resistance to Nifty. On the other hand, the range of 24550–24500 probably offers immediate support. A decisive and long -term movement beyond one of these levels can cause a new trending movement in the index.

What image would you have about Bank Nifty?

The Banking Benchmark Index, Bank Nifty, has consistently suppressed Frontline Indices in recent weeks. This persistent weakness is clearly in the ratio graph of bank Nifty versus Nifty, which is currently trading at a low of 108 days highlighting relative underperformance.

As an addition to the Bearish Toon, the Mansfield Relative Strength indicator quotes under the zero brand, indicating that Bank Nifty stays not only against Nifty but also on the wider market. Unless there is a change in Momentum, the bank space can continue to act as a resistance to the general market sentiment.

During the past week it has traded a narrow range of 888 points and finished at the level of 54114 with a profit of 0.86%. On a weekly scale it has formed a bullish candle with an upper shade, which indicates sales pressure at higher levels. The index is currently being traded under the EMA levels of 20, 50 and 100 days. Furthermore, the daily RSI is in the bearish zone according to RSI range -range rules.

Continue, the zone of 54500-54600 will act as an immediate obstacle for the index. While he is disadvantage, the 200-day EMA zone of 53600-53500 will act as crucial support for the index. A sustainable movement on both sides will lead to a trending movement in the index.

How are Banking Heavyweights HDFC Bank and Icici Bank posted now?

The combined weight of HDFC Bank and Icici Bank in the Bank Nifty is almost 55%, making it necessary for both heavyweights to perform well for the index to do this. Since the end of July, HDFC Bank has corrected 5.5% compared to its peak of 1019 on July 24, while Icici Bank has corrected 6.5% compared to the high of 1500 on July 25. The Nifty, on the other hand, has only corrected 2% in the same period, which emphasizes the relative underperformance of Banknifty, largely as a result of weakness in these two shares.

Both shares are currently acting in the short term among their advanced averages. These averages edges lower. The daily RSI, on the other hand, suggests lateral action. That is why these shares are likely to continue their side trend, together with Beerarish bias in the next few trade sessions.

FIIs remain sellers. What is the expectation here and what effects do you see because of this?

FIIs have removed almost 94600 Crore from the money market in the last two months. Sentiment has been weighed by factors such as the trade stresses of the US -India, weak business income, a depreciation call and the possibility of a rate reduction by the Federal Reserve in its policy meeting in September, making the US markets more attractive. In addition, appreciation problems and global geopolitical uncertainties have extended the sales pressure in Indian shares. That said, running policy reforms run at a high potential for a more stabilized and gradual recovery in foreign streams. However, a large and fast reversal is unlikely without a solution in trade conflicts. In the meantime, domestic institutional support can help you to step in the short term and promote selective intake.

What is the display on FMCG and sustainable consumers who post the GST reforms?

The Nifty FMCG index has witnessed profit booking after the announcement of GST reforms. Given the current map structure, we believe that it will probably witness consolidation in the short term.

While Nifty Consumer will probably continue its northern journey in the short term. It has recently given a horizontal trendline -breakout on a daily scale and it is strongly better than the frontline indices. The momentum indicators and oscillators also suggest a strong bullish momentum. That is why we believe, it will probably continue its northern journey in the next few trade sessions.

Are there other sectors that are currently in focus?

Nifty Metal: The Nifty Metal Index has achieved strongly better in the past week than front line indices. It has given a downward sloping trendline -breakout on a daily scale. The ratio graph of the index compared to the Nifty index has also given consolidation breaks, and this is currently being traded on a highest, further reinforcing relative strength. Currently, all advanced averages and momentum -based indicators suggest a strong bullish momentum in the sector. That is why we believe that it will probably perform better in the short term.

Apart from this, Nifty Auto and Consumer will continue their outperformance in the short term.

On the other hand, Nifty Private Bank, Financial Services, Defense, IT, Media, Oil & Gas and Realty sectors will probably be left in the short term.

Are there shares within those sectors?

Technically, various shares show a strong relative strength and will probably continue their outperformance in the short term. Tata Steel LTD and Jindal Steel & Power LTD have maintained Bullish Momentum, supported by favorable price promotion and volume trends. Swiggy and Eternal also show signs of strength, supported by improving sentiment in the food space of food. Pondy Oxides and Chemicals LTD (POCL) and Gujarat Mineral Development Corporation Ltd (GMDC) act with positive bias, supported by strong technical setups. Goldiam International LTD continues to show resilience, while Hyundai Motor Company and Ashok Leyland benefit from sustainable purchase interest in the automotive sector. Finally, Lemon Tree Hotels ltd holds over the most important support zones, which points to potential for further upwards. In general, these shares are well positioned to perform better in the short term, provided that broader market conditions remain supportive.

((Indemnification: Recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)