F&O Talk: Nifty Hits New Highs; Expect Breakout Above 23,500 – Sudeep Shah Recommends Buying on Dips

NEW DELHI: Nifty closed the week near the top of its upward channel, ending at 23,465 after hitting a new all-time high on Friday. Meanwhile, Bank Nifty, still in the middle of its upward path, finished at 50,002.

The markets have shown a surprising post-election rally, and both indices are currently holding strong above their short-term moving averages after touching their 200-day moving averages.

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Outlook on Nifty and Bank Nifty

Analyst Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research at SBI Securities, shared insights on the outlook for Nifty and Bank Nifty and suggested strategies for the coming week:

Market Movement

The markets have rebounded sharply from the post-election low of 21,281, with Nifty gaining over 2,000 points quickly. Although the market sentiment remains very positive, Shah expects a period of time-wise correction. This means the market might move sideways for a while, with buying opportunities on dips, especially with the upcoming Union Budget acting as a major factor.

Foreign and Domestic Investor Activity

Foreign Institutional Investors (FIIs):

• Initially had 87% net short positions in index futures at the start of the series.
• Reduced net short positions to 52% by June 14th.
• Have sold approximately Rs 1,38,221 crore since the start of 2024, indicating a lack of significant re-entry into the market.

Domestic Institutional Investors (DIIs):

• Remain bullish and have been strong buyers, absorbing FII selling in the cash segment.
• Have bought Rs 2,20,225 crore since January 2024, despite some political uncertainty.

Technical Analysis and Strategy

Nifty Analysis:

• Nifty is consolidating after a volatile election week, closing at a record high with a nearly 1% gain over the week.
• Likely to continue consolidating between 23,500-23,200. A strong move above or below these levels will signal a new trend.
• If Nifty stays above 23,500, it might reach 23,750 or even 24,000. On the downside, 23,240-23,200 is crucial support; falling below this could lead to profit booking down to 23,000 or 22,800.

Risk Management:

• In case Nifty drops below 23,200, traders can hedge by buying at-the-money (ATM) 23,200 Put Options or slightly out-of-the-money (OTM) 23,000 strike.

Put-Call Ratio (PCR):

• Weekly PCR: 1.31
• Monthly PCR: 1.16
• Indicates expected market consolidation with a positive bias. Extreme PCR levels can signal potential reversals.

Bank Nifty Outlook:

• Has underperformed slightly, with major PSU banking stocks recovering from earlier selling pressure.
• Significant call writing at 50,000 CE and 50,500 CE. A close above 50,300 could lead to short covering, pushing the index to 50,750-50,900.
• Support is between 49,500-49,700.

Bank Nifty Strategy:

• Potential comeback in frontline private banks, with HDFC Bank nearing a breakout.
• Consider a bull spread strategy in Bank Nifty for the 19th June Expiry: buy a 50,100 Call and sell a 50,500 Call.

Stock Recommendation: Indian Hotels

• Chart: Breakout on the daily scale with strong volume and a sizable bullish candle.
• Moving Averages: Trading above both short and long-term averages, which are rising.
• Relative Strength Index (RSI): Daily RSI above 60 for the first time in 42 trading sessions.
• Recommendation: Buy between Rs 615-610 with a stop loss at Rs 590. Target Rs 650, followed by Rs 680.

With these technical and derivative indicators in favour of the bulls, Sudeep Shah recommends focusing on broader market opportunities while keeping an eye on Nifty and Bank Nifty’s key levels for strategic trading decisions.