Nifty could test 17,300 if 17,500 support is breached

Technical analysts expect the Nifty to fall further in the week before the FY23 Union Budget on February 1. Analysts said the Nifty could fall to 17,300 if it breaks the support of 17,500. Last week, the indices fell 3.5% — logging their worst weekly performance in eight weeks — amid concerns over inflation and the US Federal Reserve’s policy tightening. Analysts are bullish on sugar, fertilisers, defence and real estate stocks in the near term.

RAJESH PALVIYA

HEAD-TECHNICALS AND DERIVATIVES, AXIS SECURITIES

Where is Nifty headed in the week ahead of the Budget?

If the Nifty breaks below 17,500, it would witness selling, which would take the index towards 17,300- 17,100. However, if it crosses and sustains above 17,800 levels, it would witness buying, which would lead the index towards 18,000- 18,300 levels. The index is trading above the 50-day short-term moving average, which is an important factor. The daily and weekly relative strength indicator (RSI) is in a bearish mode, which supports bearish sentiments ahead. For the week, we expect Nifty to trade in the range of 17,300-17,900 with a mixed bias. We expect the index to remain volatile ahead of the Budget, so one should focus on a sector/ stock-specific approach. We expect sugar, fertilisers, defence and real estate to do well in the near term.

What should investors do?

We are suggesting a bearish strategy for the monthly expiry scheduled on January 27. The strategy is a Put Ladder, which involves buying one lot of Nifty 17,650 Put option at Rs 160 and selling of one lot each of 17,450 Put at Rs 84 and one lot of 17,250 Put at Rs 43. Traders should note that the Put Ladder is a limited profit and unlimited risk strategy. The maximum profit of Rs 8,350 will be attained at 17,450 levels, while losses will follow below 17,000. The cost involves an outflow of Rs 1,650, which is the maximum loss if Nifty closes and remains above 17,620 levels on expiry. Any sharper movement on the lower side could result in losses and as an extra put has been sold, it’s advisable to exit the strategy to avoid unlimited losses below 17,000. The break-even points are 17,617 on the upside and 17,017 on the lower side.

CHANDAN TAPARIA

DERIVATIVE ANALYST, MOTILAL OSWAL

Where is Nifty headed in the week ahead of the Budget?

The Nifty has been making lower high-lower lows from the last three trading sessions. Recently, it broke its rising support trend line and the immediate trend has taken a setup back for a sharp correction led by weakness in global markets and foreign institutional investors’ selling. It formed a Doji candle on the daily scale after the weakness of the last three sessions but the selling pressure is intact at higher zones, which needs to be negated for any kind of trend reversal. Till the index remains below 17,770, weakness could be seen towards 17,500 and 17,350 whereas hurdles exist at 17,950-18,000 zone.

What should investors do?

Investors are advised to use this dip for buying opportunities and bargain hunting in private banks, consumption, IT, auto and chemicals. Index traders can initiate bear put spread by buying 17,600 put and selling 17,400 put with a premium cost of around 60 points to play the downside hedge or move towards 17,400. Stock specific positive setup could be seen in Reliance, Maruti, ICICI Bank, Pidilite Industries and Power Grid. While weakness is likely in M&M Finance, ZEE, Dr Lal PathLabs and Voltas

SIDDARTH BHAMRE

DIRECTOR, ALTERNATIVE INVESTMENTS AND RESEARCH, INCRED EQUITIES

Where is Nifty headed in the week ahead of the Budget?

Last week’s correction has caused a lot of pain among retail participants as the mid-and small- cap segments corrected substantially with huge corrections in some of the widely-held names. This is an imported correction as the Dow fell significantly with the US Federal Reserve all set to raise interest rates in the near term due to rise in inflation. The Dow is reaching an important support zone of 33,600- 34,000 and the Nifty, too, has strong support around the 17,200-17,300 zone. The Dow has managed to bounce back from this support zone 3-4 times in the last six months or so. Nifty has consolidated around the above support in the recent past. From a medium-term perspective, equities are still in an uptrend as long as these zones are respected.

What should investors do?

It’s interesting to observe that despite the weakness in the Nifty (mainly due to the fall in the IT space), the private sector banking space has shown some signs of buying at lower levels. Bank Nifty has strong support around 36,500 levels and some of the heavyweights are showing signs of strength. It’s highly unlikely that the Nifty may breach important supports with some strength being visible in banking. There is sectoral churning and this correction so far appears more within a bull market. We would suggest not to get bearish till the important support zones across indices are respected. Banking and auto stocks are poised to outperform with selective FMCG names looking attractive after months of underperformance.