Nifty likely to hit life-time high of 15,400 in May, BFSI, pharma, metal sectors may outperform

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By Dharmesh Shah

Nifty Outlook

In the week gone by equity benchmarks extended gains over the second consecutive week despite elevated volatility spooked by surging second wave of COVID-19 across India. The Nifty concluded the week at 14823, up 1.3%. Broader market relatively outperformed as Nifty midcap, small cap surged 1.3% and 2%, respectively. Sectorally, metal, pharma and IT remained in limelight while realty underperformed

Despite Monday’s gap down opening index managed to hold last week’s low of 14400 and staged a strong pullback during the weekBank Nifty outlookThe weekly price action formed a bull candle with shadows in either direction, indicating elevated volatility as the index is forming higher base above the 61.8% retracement of previous two week up move (30405-34287).We reiterate our positive stance with target of 34900 levels, in May’21 as it is the 61.8% retracement of the entire last two months decline (37708-30405). While in the upcoming truncated week any decline towards 32000-32400 would attract strong buying demandKey point to highlight is that over the past seven sessions the index has retraced just 61.8% of preceding seven sessions up move (30405-34287). The slower pace of retracement indicates a higher base formation.The slower pace of retracement after the recent up move of 3880 points, which is the larger in magnitude compared to late February up move of 2256 points highlights robust price structure and the current consolidation should be used as an incremental buying opportunity in quality banking stocksThe index has immediate support at 32000-31500 levels being the confluence of the last two weeks low and the 61.8% retracement of the current up move (30405-34287). While the major support is placed in the range of 30500-30000 levelsThe index has maintained the rhythm of not correcting more than 20% as witnessed since March 2020. In the current scenario, it rebounded after correcting 19% from the all-time high (37708). Hence it provides favourable risk-reward setup for the next leg of up moveAmong the oscillators, the weekly stochastic is in uptrend and placed at a reading of 52 thus supports the continuation of the pullback in the index in coming weeksBank Nifty has maintained the rhythm of not correcting more than 20% as witnessed since March 2020

(Dharmesh Shah is the Head – Technical at ICICI Direct. Please consult your financial advisor before investing.)

ICICI Securities Limited is a SEBI registered Research Analyst having registration no. INH000000990. It is confirmed that the Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 22/04/2021 or have no other financial interest and do not have any material conflict of interest. I-Sec or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months