Bank Nifty's role crucial in Nifty's march past 16,000 mark: Sameet Chavan

The truncated week had started with a surprising gap down on Monday due to some nervousness across the globe. As the day progressed, the selloff augmented, resulting in a close below the 15,800 mark for Nifty. In fact, a follow-through on the subsequent day pushed Nifty to test sub-15,600 levels. Fortunately, global peers witnessed a relief move which resulted in a V-shaped recovery in our markets. Eventually, Nifty ended the action-packed week with negligible losses.

It’s been more than a month now that Nifty is trapped in a range of 500 points. This certainly is a slender range considering we are trading at much-elevated levels. For the most part of June, we were confined to domestic triggers but come July, global factors started to influence our markets to a great extent. Unfortunately, global peers were experiencing some selloff when Nifty was about to reach the milestone of 16,000 but some relief was seen at crucial supports. Last week’s price action was a replica of this. After undergoing some price correction for the first couple of days, we witnessed a good relief rally to reclaim the important level of 15,800 on a closing basis.

This certainly bodes well for the bulls but considering the recent trend, we are still not out of the woods yet. So rather than pre-empting and getting caught on the wrong foot, we would wait for Nifty to surpass the sturdy wall of 16,000. If this happens, then 16,200 – 16,400 would be next immediate levels to watch out for. Although these levels may appear not so far from 16,000, we would see good stock specific action in this range. If Nifty has to reach and surpass the magical figure of 16,000, banking certainly has to play a vital role. It would be very important for the banking index to surpass the 36,000 mark to push the benchmark to new highs. Until then 35,000 – 35,500 are to be considered as intermediate hurdles. On the lower side, the cluster of supports for Nifty is placed at 15,700 – 15,550 – 15,450 and for BANKNIFTY, 34,200 – 33,900 are to be seen as make or break levels. Any sustainable move below the lower end of this support zone would reverse the short term trend in the downward direction.

Stock recommendation

NSE Scrip Code – MIRZA INTERNATIONAL

View – Bullish

Last Close – Rs 63.05

Justification – This company is one of the leading footwear manufacturers but has not done much over the past year and a half. However, recently, we witnessed a good base building in this stock, tad above the Rs 50-mark. On Friday, we witnessed a decisive breakout from its long consolidation range with some authority. On the daily chart, it formed the bullish configuration known as ‘Cup and Handle’, with a breakout above the multiple times tested resistance of Rs 61. Volume activity clearly suggests huge market participation. Since the breakout has happened on the weekly time frame chart as well, we recommend buying for a short term target of Rs 70. The stop loss can be placed at Rs 59.50.

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Disclaimer: Sameet Chavan is chief analyst- technical & derivatives at Angel Broking. Views expressed are personal.