Domestic benchmark indices BSE Sensex and NSE Nifty 50 have recovered strongly in the last few trading sessions. Nifty 50 bounced back from the key support of 16800 and now could be heading towards 18100, said technical analysts at ICICI Direct. “Benchmarks reclaimed half the ground lost over the past six months as the cluster of support in the vicinity of 52 week’s EMA generated buying demand after markets moved to an oversold trajectory,” analysts said in a report. The banking index is also expected to surge higher in the coming weeks and test 38000 levels as volatility cools down on Dalal Street.
Nifty heading up as volatility cools down
Chartists at ICICI Direct said that their buy on dip strategy has worked so far for investors as the index climbed the wall of worries after digesting a host of concerns owing to the geopolitical issues, Fed rate hike, rise in VIX and crude oil prices. Now, they believe, the Nifty has formed a strong base above 52 week’s EMA that has set the stage to retest the upper band of the falling channel at the 18100 mark. The 18100 target is the confluence of 80% retracement of the entire corrective phase since October 2021 (18604-15671). Key support is placed at 16800.
Additionally, the cooling-off of the India VIX gauge is also seen as a positive for equities. India VIX is just above 20 levels on Thursday down from 28 levels a month ago. “Historically, a cool off in VIX after a spike above 30 levels signifies an intermediate bottom is in place for equities that leads to decent rally in the near term,” the report said.
Buy Bank Nifty on dips, target 38000
“Dips should be used as a buying opportunity. We expect the index to resolve above last two week’s highs (36800) and gradually head towards 38000 in the coming month,” said analysts at ICICI Direct. They added that the recent breather of the last two weeks should not be seen as negative, instead, it should be capitalised on as a buying opportunity in quality banking stocks. “We expect the index to resolve above last two week’s highs (36800) and gradually head towards 38000 in the coming month as it is the 80% retracement of the February-March decline (39424-32155).”
Sectors to watch out
On the charts, the metal Index has witnessed a breakout above the last five month’s range. “It has seen an improvement in both relative and movement terms and is currently at the out-performer quadrant. We expect metal stocks to continue their outperformance,” ICICI Direct said. Further IT stocks are also in the out-perform quadrant. Analysts noted that banking and realty stocks are now seen to be resuming up-move after the recent profit booking, thus providing a bargain buy opportunity along with auto stocks.
Eqwires Research Analyst
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