ICICI Securities said any dip towards 11,600-11,500 range should be used as an incremental buying opportunity.
Equity benchmarks extended their winning streak to record fresh life-time highs in August 2018. This followed a global equity rally and expectation of domestic earnings pick up as fears of escalating trade wars played down. Sentiments remained strong despite the rupee hitting fresh lows.
The Nifty remains on a strong footing amid broad based participation and continuance of rising peak and trough formation.
Going forward, we expect the Nifty to extend its current up move towards 11,925 while 11,500 is likely to anchor any corrective declines in coming months. Thus any dip towards 11,600-11,500 range should be used as an incremental buying opportunity.
The Nifty surpassed our projected target of 11,400 in August led by broad-based sectoral participation highlighting underlying strength in the ongoing rally. Participation of under owned sectors like pharma was a key highlight and highlights underlying strength.
The current rally from July 2018 low of 10,604 has become larger in magnitude (11 percent) compared to April-May 2018 rally (9.8 percent) indicating positive development in price structure.
The positive structural development and broad based participation makes us confident on upgrading the target to 11,925 in coming month as it is confluence of 123.6 percent extension of April-May rally (9,950-10,930) at 11,898 and 161.8 percent retracement of CY18 decline (11,171-9,950) is placed at 11,925.
We reiterate our positive stance on the broader market space. Midcap, small cap indices have broken out of their bullish falling wedge pattern & indicate structural improvement. The combination of price pattern & structure analysis makes us believe midcaps and small caps have further legs on the upside in coming weeks. Investors should focus on quality names to ride the expected up move.
Sectorally, FMCG, pharma and metal are likely to outperform. Meanwhile, realty and capital goods indices are poised at key value area offering bargain buy opportunity in quality stocks.
Bank Nifty
The Bank Nifty extended its gains into August after registering fresh life-time highs early during the month. Index heavyweight HDFC Bank took a breather after its multi-month outperformance while under owned corporate facing banks outperformed. Nifty PSU, private bank indices settled up around 3 percent each.
The monthly price action formed a smaller bull candle with higher high and higher low indicating continuance of positive bias. The index began the month on a buoyant note to record a fresh life-time high of 28,377, thereby achieving our projected target of 28,350 in the process. The index then went on to consolidate in subsequent three weeks as it digested the 9 percent rally from July lows (26,060) range of 27,165-26,000.
The current consolidation has helped the index form a higher base above 27,500, which would set the stage for the next leg of the ongoing up trend. In the coming month, we expect the index to register a breakout above the last three week’s consolidation range and head towards 29,200 as it is the confluence of:
• 138.2% retracement of the January–March 2018 decline (27,652-23,605) placed at 29,197
• Higher band of up trending channel around 29,000-29,200
The entire up move since March low (23,605) is well channelled highlighting sustained demand at elevated levels. During the recent corrective decline, the index rebounded from the lower band of the rising channel highlighting a robust price structure and inherent strength in the current up move.
We upgrade our short-term support to 27,500 as it is confluence of the following technical observation:
> the lower band of the rising channel containing the entire up move since March, currently at 26,400
> 38.2 percent retracement of the up move from July lows of 26,060 at 27,492
Weekly 14 periods RSI remains in uptrend and is seen taking support at its nine period average, thus validating positive bias.
Disclaimer: The views and investment tips expressed by ICICI Securities on Moneycontrol its their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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