Nifty eyes breakout ahead of expiry week; buy-on-dips strategy favoured: Rajesh Palviya, Axis Securities

Till Nifty is holding above 24,700 mark, trend is likely to exhibit on the bullish side and once it manages to cross above 24,900, 24,950 zone, here we could see a good amount of short covering action and then possible rally can extend further to 25,100, 25,200 zone as in the coming week we are going to enter in the expiry week for the series. So, it would be very interesting to see whether Nifty is able to give a breakout of this 24,900, 24,950 zone or not, says Rajesh Palviya, Axis Securities.

ET Now: Given the kind of moves that we have seen over the course of the week, one would have hoped to end at least flattish or in slightly positive on the Nifty, but that has not been the case and this has been the second week of consolidation coming in even though it is very nominal. Give us a sense of what next week's trading session looks like for us because we are also approaching the fag end of the earnings season.

Rajesh Palviya: So, it was a very volatile week for the indexes. We have witnessed that for Nifty 25,000 acted as the major supply zone, as a major call concentration was placed at around those level and when Nifty was attempting to give breakout above 25,000, most of the call writers were adding the position around those strike only, that has created some pressure on the indices from higher level. But in this correction, Nifty has almost tested its 20-day moving average, and we have seen a very sharp recovery from those levels. Even for the Bank Nifty, Bank Nifty also managed to hold above the 20-day moving average in this corrective move. So, both indices are well placed above near-term moving averages, so I think that clearly indicates that yes, there is a strength in the indices for a near-term perspective and buy on dip should be your strategy till the 20-day moving average is intact for both the indices. So, for Nifty on the downside we believe that till Nifty is holding above 24,700 mark, trend is likely to exhibit on the bullish side and once Nifty manages to cross above 24,900, 24,950 zone, here we could see a good amount of short covering action and then possible rally can extend further to 25,100, 25,200 zone as in the coming week we are going to enter in the expiry week for the series. So, it would be very interesting to see whether Nifty is able to give a breakout of this 24,900, 24,950 zone or not. For Bank Nifty, till Bank Nifty is holding above 55,000, there is a possibility that Bank Nifty may also manage to give a breakout above the 55,600 level. If this happens, here also we may see some short covering action to trigger and then, a possible rally can extend to 55,900, even 56,200 level also. In today's session, we have witnessed some of the private banks showing buying interest, as well as PSU banks are also witnessing some buying interest, so Bank Nifty may also give a good kind of rally in the coming weeks. So, both indices, buy on dip, should be a strategy.

ET Now: Let me ask you, like I will keep it with the US tax policy space. Since we had the bill coming yesterday overnight, I want to understand your view on the clean energy space. We did have the companies that do have exposure to the US clean energy space, they did come down a lot today, seeing a lot of downtick following the development. So, what kind of levels should we be tracking for those kind of companies going ahead into the next week?

Rajesh Palviya: Well, in the energy space, we have witnessed profit taking from the higher level,l and this is likely to continue on the higher side. Nifty energy index is facing resistance at around the 35,600- 35,700 zone. So, till this level is not taken out on the higher side, some profit taking would be there around these levels. So, 35,600, 35,700 are the immediate hurdles for the indices. On the energy basket, a lot of stocks are witnessing supply pressure at a higher level. If we go with the stocks like ONGC and other stocks, they are all facing resistance at the immediate basis on the near-term chart, 248 to 250 is the immediate hurdle for the ONGC; until the stock does not cross this level, we may see some consolidation or some downtick in this counter. So, maybe on the downside, around 230 would be the next level if the stock does not cross 248. So, this space may attract some profit taking in the near-term perspective, so wait for this supply pressure to settle down and then on the lower side again, one can review this stock basket.

ET Now: So, I wanted to understand which are your top picks for the day.

Rajesh Palviya: Two stock ideas, both on the buy side. The first one is from the insurance space, that is, ICICI Prudential. If we look at the overall behaviour of the insurance space, most of the stocks have delivered a good amount of buying interest this week. Looking at the breakout on ICICI Pru on a weekly chart, we believe that here we could see furthermore momentum in the coming week and a possible target towards 668 to 670 we can witness. So, ICICI Prudential is a buy with a stop loss of 630. The second stock is from the capital goods space, that is, ABB. After a significant correction stock has spent almost 10 to 15 weeks in a very narrow price range, and after the accumulation of 10-15 weeks, the stock has now managed to break breakout of this consolidation range. Looking at the breakout, we believe that ABB can extend its move on the higher side. We are projecting a target towards 6140 with a stop loss of 5900.

ET Now: I also want to understand your take on the news flow that we have seen over the course of the week wherein we are hearing some buzz that the sebi may give nse nod to move its expiry to Tuesday. Give us a sense of how this would pan out for the market in terms of flows, any major impact to the overall flows, expiry dates, how is it going to pan out for our markets overall?

Rajesh Palviya: So, a change in expiry days would also…, the whole movement of the market will stick to one day if expiry days move to one date only. So, I think that may create some kind of volatility in the market because there is still multiple expiries for the weekly options…, but if it is on the same day so that may attract a higher volatility in the market, so that would be the immediate impact, but I do not think it will create major changes in terms of behaviour of the traders, but yes, volatility would be little higher on the same day if the expiries move to the same date.

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