Indian equity markets could witness a 2-5 per cent move during the September derivatives series, with the Nifty likely to remain in a broad range of 24,000-24,500 in the near term, according to Jay Thakkar, Head of Derivatives and Quant Research – Vice President.
The Nifty ended the week above the critical 24000 support level but the overall market breadth remained weak, which is not a positive sign.
For the September series, the critical level is 24000 as below that there is no major put base before 23500. Whereas, on the upside 24500 remains the critical resistance as it has the highest call base, Thakkar stated.
Hence, he said the range for Nifty is 24000 to 24500 for the coming week.
“Whichever side it breaks will lead to another 500 points move. India VIX continues to trade at the lower end of the range since the past several weeks now; hence, a short-term bounce cannot be ruled out,” the analyst added.
“It has been observed on four occasions in the last decade that whenever there have been 4 to 5 flat monthly expiries on a consecutive basis, there has been at least a 2 percent move in the index in the next monthly expiry and approximately 5% move by the end of the subsequent monthly expiry,” he added.
Based on the outlook, the recommendation is to buy Nifty with a stop loss at 24,000, with targets of 24,500 and 24,800.
On Monday, oil prices surged more than 3 per cent after US forces struck Iranian rocket launchers on the Strait of Hormuz, marking their first military action in a month. The Trump administration just days earlier had shifted its focus to economic pressure, and a return to open conflict would be dangerous for the region.
Dollar index sustains below 100 which is also positive for global equities. As far as US equities are concerned, Friday’s close will decide whether it will close positive or negative.
Overall, Thakkar said the bullions continue to be in the uptrend on account of weakness in crude and dollar. “Hence, based on above observations if crude continues to slide lower the then the equities will benefit from it,” he added.
Technical picks for the week
The analyst has recommended buying Kotak Bank futures in the range of Rs 420-426, with a stop loss below Rs 406 and targets of Rs 442-450.
Thakkar said Kotak Bank closed well in the positive territory in the last trading week and with that there were long additions in the futures segment indicating a positive trend in the near term.
“Going forward the stock seems to be in an upward trend as it has provided a breakout after a long consolidation and in that process, there were no short positions built up in the stock which is positive sign,” he stated.
“As per the options data, 400 and 410 strikes have witnessed significant put additions which is likely to act as a support whereas 420 strike has the highest call base which is a hurdle, however, above those levels there is no major hurdle. The stock is trading well above 415 levels which is its max pain, hence that will also act as a short-term support,” the analyst added.
OFSS futures: BUY recommendation
Thakkar also recommended buying OFSS futures in the range of Rs 12,100-12,200, with a stop loss below Rs 11,900 and targets of Rs 12,800 and Rs 13,000.
He said OFSS has provided a clean breakout well above multiple swing resistance levels which were acting as a string resistance. However with this breakout, there has been a clear long addition which is a positive sign.
“The stock has been an outperformed in the Nifty IT sector and with this breakout it is likely to continue its outperformance as it has not witnessed any short built up during the consolidation phase. As per the options data, only 12500 strike has the highest call base which may act as a short-term hurdle, however above those levels there is no major hurdle. The stock is trading well above its max pain level of 12000 which may act a support going ahead,” he added.
