Market Optimism Prevails Despite Minor Corrections; Focus on Banking and BFSI Stocks Intensifies

Benchmark indices Nifty and Sensex have been moving upwards, and the market is expected to stay strong after the Lok Sabha election results. Last week, Nifty found support near 23,400, while Sensex faced resistance around 77,850. On Friday, Sensex dropped 269 points (0.35%) to settle at 77,209, and Nifty fell 66 points (0.28%) to end at 23,501. Despite ending the week in red, analysts believe the overall market outlook is positive.

Insights from Sahaj Agarwal of Kotak Securities

Sahaj Agarwal, Senior Vice President and Head of Derivatives Research at Kotak Securities, shared his views on Nifty and Bank Nifty for the upcoming week. He emphasized the importance of the medium-term market setup, considering factors like price behavior and global liquidity. Agarwal noted that after the election period, the market has overcome significant hurdles, and he expects Nifty to reach targets of 24,200-24,500.

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Nifty and Bank Nifty Analysis

Agarwal mentioned that the call and put writing near the ATM strike prices was significant until the June 20 expiry. Currently, there’s substantial open interest at 23,000/23,500 put and 24,000 calls, suggesting a potential upside as long as Nifty stays above 23,400. Bank Nifty, which has underperformed recently, might see more movement due to its attractive value proposition in the banking and BFSI sectors.

Market Volatility Ahead of Budget

Agarwal advised traders to remain focused on the market’s positive undertone, despite potential volatility ahead of the July budget. He suggested looking for opportunities to buy on dips, as the medium-term outlook remains strong with support around the 20,000-21,000 mark.

FII and DII Positions

Foreign Institutional Investors (FIIs) are now net long on index futures, while Domestic Institutional Investors (DIIs) are net short, likely as a hedging strategy. Agarwal pointed out that while FII and DII positions provide useful insights, they should be considered alongside other indicators.

Advice for Retail Investors

Agarwal recommended that retail investors stay invested, either in the broader market or in specific opportunities where value and momentum align. He highlighted select banking and BFSI stocks as areas with strong potential.

Outlook for the Upcoming Week

For the near term, Agarwal expects positive momentum in the market as long as Nifty stays above 23,400. A breach of this level could lead to consolidation or correction but won’t change the medium-term positive outlook.

Index vs. Stock Options

Agarwal prefers index options for trading due to their broader market exposure, using stock options selectively when opportunities arise.