F&O Talk| Nifty resistance placed at 25,250-25,300, consolidation likely amid geopolitical tensions: Sudeep Shah of SBI Securities

Nifty has been in a sideways range of 25,200 – 25,800 for six days. It closed below the 25,000 mark on Friday, facing resistance at 25,044, where the 50-day EMA is located.

Indian equity indices closed lower after a volatile session on October 11, with the Nifty closing below 25,000. The Sensex closed down 230.05 points or 0.28% at 81,381.36, while the Nifty shed 34.20 points or 0.14% at 24,964.30.

SBI Securities Deputy Vice President and Head of Technical and Derivatives Research Analyst Sudeep Shah spoke to ET Markets on the outlook for the Nifty and Bank Nifty along with the index strategy for the coming week. Following is an edited excerpt from their chat:

The Nifty is currently hovering below the 20 DMA for the second week in a row. What is your view on Nifty from here?

The benchmark index Nifty has experienced a nearly 6% correction from its all-time high, driven by aggressive FII sell-offs and geopolitical tensions in the Middle East. However, despite these challenges, the Nifty found support at a low of 24,694 and thereafter slipped into a period of consolidation.

From a technical perspective, the Nifty has been trading in a tight range for the last three sessions, which has led to a flat rise above the 50-day EMA. Daily RSI is also showing signs of indecisiveness as it is trading in the sideways zone according to RSI range shift rules. Consequently, we assume that Nifty may continue to consolidate in a narrow range for the next two trading sessions.

Talking about the levels, the zone of 24,700-24,650 will act as an immediate support for the index. Whereas, on the upside, the zone of 25,250-25,300 will act as an immediate barrier for the index. Any sustained move above or below this zone could result in a strong directional move for the index.

If the index slips below the 24,650 level, the 100-day EMA will act as the next crucial support, which is currently placed at the 24430 level. On the upside, if the index sustains above 25,300 levels, we may see a sharp pullback rally to 25,850 then 25,600 levels in the short term.

What is your view on Bank Nifty?
From the all-time high, Bank Nifty has seen a correction of over 4000 points in just 7 trading sessions. However, it hit a low of 50194 on October 07 followed by a pullback rally of around 1000 points. Finally, it ended the week at 51172 with a marginal loss of 0.56 percent.

On a weekly basis, it has formed a small body candle with a long lower shadow. A long lower shadow indicates buying interest at lower levels. With this pullback rally, the index has regained its 100-day EMA level. Daily RSI is currently in sideways zone as per RSI range shift rule. Hence, we believe that the index is likely to witness consolidation in the next two trading sessions.

Going forward, the 50-day EMA zone of 51700-51800 will act as an immediate barrier for the index. Any sustained move above the 51800 level will lead to an extension of the pullback rally to the 52500 level, followed by 53100 in the short term. While, on the downside, the 50700-50600 zone will act as an immediate support for the index. Any sustained move below the 50600 level will resume its southward journey. In that case, it is likely to test the level of 50000, followed by 49600 in the short term.

Despite the soft results of TCS, Nifty IT has also shown resilience on Friday and has remained a stable weekly close in the current consolidation phase. Do you see any opportunities for investors there?

For the past two weeks, Nifty has been consolidating in the IT sideways zone, forming a bullish flag type pattern. Going forward, the zone of 43100-43200 will act as an immediate barrier for the index as the trendline above the bullish flag is placed in that region. Any sustained move above 43200 level will lead to sharp volatility in Nifty IT. In that case, it is likely to test the level of 44300, followed by 45000 in the short term.

Which sectors do you think could outperform in the coming week?
During the last week, Nifty Midcap 100 and Nifty Small Cap 100 have taken support near their 20-week EMA levels and witnessed a sharp recovery. Both of them have strongly outperformed the frontline indicators. Interestingly, both formed a small body candle with a long lower shadow, indicating buying interest at lower levels. Hence, we believe both of them are likely to outperform in the short term.

Apart from this, Nifty Pharma and Healthcare are likely to outperform in the short term.

HDFC AMC closed the week strong. What are your views on it?
The stock has recently taken support near the 20-week EMA level and has witnessed a sharp recovery since then. With this recovery, the stock has bounced above its 20 and 50-day EMA levels. This average has started to move higher, which is a bullish sign. The daily RSI is going to cross the 60 mark.

Going forward, the stock is likely to continue its northward journey and test 4650 then 4550 levels in the short term. While, on the downside, the 20-day EMA zone of 4360-4340 will act as an immediate support for the stock.

Indian hotels saw a strong move. Do you think this uptrend can continue in the coming weeks?
The stock has taken support near the 50 percent Fibonacci retracement level of its previous upward rally (Rs. 571-720) and has since seen a sharp upside rally. The main trend of the stock is bullish as it is trading above its short and long term moving averages. These averages are in an ascending trajectory, and are in the desired sequence, indicating that the trend is strong, which is a bullish sign. The daily RSI has bounced above the 60 mark and is in a bullish mode.

Going forward, the stock is likely to continue its upward journey and test 770 then 740 levels in the short term. While on the downside, the 20-day EMA zone of 690-685 will act as immediate support for the stock.

NBFCs like M&M Fin have seen selling pressure and breached key support zones. Do you think the decline can continue?
Yes, M&M Finance is likely to continue its southward journey in the next two trading sessions. The stock has given an upward sloping trendline support breakdown along with high volume. Further, it has slipped below its 20, 50, 100 and 200-day EMA levels. This average starts from the lower edge. Momentum indicators and oscillators also indicate bearish momentum. Daily RSI is in super bearish zone.

Therefore, we believe it is likely to continue its southward journey and test the 270 level in the short term.

Any stocks on your radar?
Technically, Exide Industries, National Aluminum and Triveni Turbine look good in the short term.

(Disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. These do not represent the views of Economic Times)