Weak hands have exited market; Bank Nifty to continue outperformance: Vaishali Parekh

The Nifty50 index dropped about a per cent this week. What were the reasons for the weakness in the benchmark indices during the week?

The benchmark was continuously moving up for 14 sessions since July 27. Generally, profit-booking takes place after such a long run which we technicians call as correction. Hence, the reason for this fall was mainly profit-booking. Also, the uncertainty due to global events intensified fall where weak hands exited.

Nifty Bank was an outperformer in the recent week, compared to Nifty50. What is your take on it? Do you see this pattern to continue in the next week or two or even by the expiry of the September series?

The Nifty Bank reached the overbought zone earlier than Nifty50 during the fall April to June 2022. The overbought situation caused buying in the banking and financial services sector. Hence, we witnessed Nifty Bank becoming stronger than Nifty50.

Also, the weakness in IT and pharma sector restricted the upside move of Nifty50 and Nifty Bank moved ahead of Nifty50. We are expecting Nifty Bank to maintain its outperformance against Nifty50. This situation may change sometime in future when Nifty IT and Nifty pharma bottoms out.

Midcap and smallcap stocks also outperformed during the week. Do you see recovery sustaining in them?

The uncertainty due to global events has shaken out weak hands. The midcap and smallcap indices may lose their comparative strength over Nifty50, if it crosses below 17,340. The failure of Nifty50 to cross below 17,340 may sustain the strength in midcap and smallcap segments.

IT stocks were the worst performer during the week. What does the chart suggest for the index? What is your take on midcap and smallcap IT counters?

The trend of Nifty IT Index is down and there is no evidence visible as of now of trend change to up. Comparatively, midcap and smallcap IT stocks are showing strength but further slide in IT Index may trigger fall in midcap and smallcap IT stocks also. The important level to watch on Nifty IT is 30,600. The cross above 30,600 will be the first sign of possible trend change to up.

PSU lenders, media and metal stocks gained the most during the week. Do you think that the outperformance will continue in the near term? Which stocks are best suited to play this theme?

Ans: Yes, we believe that outperformance will continue. The

, and look best among PSU lenders. The media index moved up mainly on ‘s acquisition by Adani group. In the metal sector, and look good.

On a technical front, what are the key support and resistance levels for the Nifty and Bank Nifty and what should be investors’ strategy to make best of it?

The important levels to watch for next few weeks are supported at 17,340 and 17,000, whereas resistances are around 17,750 and 18,000. The 17,000-16,800 area is a strong support area and traders can initiate buying in this support area with stop loss at 16400. The Nifty50 is expected to move up till 18,600 before the end of December 2022.

What are your key picks to trade in the near or medium term? Do you have any suggestions?

Buy

with a target price of Rs 1,850 and a stop loss of Rs 1,600. The stock has an upside potential of more than 11 per cent.

Agencies

The stock has been in a gradual rising trend and is on the verge of a trendline breakout above the Rs 1,640 levels and the indicators look favorable for further upward movement in the coming days. The RSI is on the rise to improve the bias and with good volume participation witnessed, we recommend a buy in this stock for an upside target of Rs 1,850 keeping a stop loss of Rs 1,600.

Also, one can buy

with a target price of Rs 325 and keeping a strict stop loss of Rs 260. With a close around Rs 285, the stock has an upside potential of 14 per cent.

Agencies

The stock has been in a trending mode with a series of higher bottom formation patterns and currently the support has formed near Rs 260 levels and we anticipate a further rise to reach the 200 DMA, which is around Rs 306 level in the coming days. The RSI is also on the verge of a trend reversal to improve the bias and with the chart looking attractive with good volume participation witnessed, we recommend a buy in this stock for an upside target of Rs 325 keeping a stop loss of Rs 260.

Traders can also initiate a long position in

with a target price of Rs 5,000 but the stop loss has to be kept at Rs 4,050. The stock can rally over 14 per cent from its latest close at Rs 4,378.

Agencies

The stock after a huge correction right from Rs 9,694 to Rs 3,700 levels has been consolidating for quite some time at around Rs 3,700 – Rs 4,000 levels and has now given a positive bullish candle with good volume participation. The RSI has also indicated a trend reversal signaling a buy and we anticipate there is a huge potential for more upside targets. We recommend a buy in this stock for a target of Rs 5,000 keeping a stop loss of Rs 4,050.