Nifty MidCap index at crucial juncture: Sameet Chavan of Angel Broking

On the daily chart, the Nifty MidCap index in reaching the '100% Price Extension' of the previous up move

Market outlook

Last week started on a pleasant note for the Indian markets as some positivity was seen across the globe. Amid this, the benchmark registered a fresh record high while the banking remained quiet on the first day. During the remaining part of the week, Nifty consolidated in a small range as the banking sector kept sulking. Fortunately, the IT space saw some renewed buying interest which kept the benchmark in the positive terrain to eventually register yet another record high beyond the 15,800 mark. Among the key indices, Nifty gained 0.82 per cent during last week, which was mainly led by handsome gains of 4.52 per cent in Nifty IT. The Nifty Midcap 50 index too added another 2.57 per cent to its kitty, however, the banking remained a laggard by losing over half a per cent.
 

Since we are trading in uncharted territory, a small uptick from hereon would give us a new high. Hence, it should be considered only as a number now. Since the last couple of weeks, we have been mentioning how there is no major hurdle seen before 16,000 and in line with this, Nifty has been continuing its rally. But the price action we witnessed during the week, especially in the banking space, is not giving us comfort anymore. Hence, if the benchmark has to reach this milestone of 16,000 and even move beyond it, the Bank Nifty needs to surpass the sturdy wall of 36,000. If it fails to do so, then we may see some bouts of profit booking in the forthcoming week. The key support is to be seen at 15,700 – 15,550 for Nifty whereas 15,850 – 15,900 are to be considered as immediate resistances. 

There is another notable observation that is making us a bit cautious at current levels. The Nifty Midcap 50 index, which is enjoying its dream run since many months, has now reached a crucial juncture. On the daily chart, we can see it reaching the ‘100% Price Extension’ of the previous up move and importantly on the weekly time frame, we can see it coinciding around the ‘161% Price Extension’ of the first up leg started after March 2020 lows. By highlighting this, we do not expect the multi-year Bull Run to end but at least a short term pause or profit booking cannot be ruled out. Hence, traders are now advised to take some money off the table and avoid aggressive bets overnight. Also, the stock-specific approach still can be continued but one has to be very fussy and should follow proper risk management from hereon. 

Stock recommendations

Caplin Point

View: Bullish

Last Close: Rs. 665.55

Justification: The pharma space did exceedingly well on Friday and some of these midcap names were completely on a roll. As far as this stock is concerned, the prices saw some renewed buying interest in the latter half of the week. On Friday, we witnessed a smart surge in the counter along with sizable volumes. With this, it has managed to close at its highest level in three years. The intensity, at which this breakout has come, indicates the beginning of the next leg of the rally and hence, we recommend going long for a short term target of Rs 750. The stop loss can be placed at Rs 609. 

Balkrishna Industries

View: Bearish

Last Close: Rs 2,241.90

Justification: This tyre manufacturing company has given a colossal rally in the last 14 months and has certainly outclassed its peer counters by a fair margin. Although the higher degree trend remains strongly bullish, we can see some fatigue in stock prices as it has started to lose momentum over the past few sessions. On Thursday, we witnessed a ‘Shooting Star’ pattern which is a sign of exhaustion in prices and the said pattern got confirmed in the subsequent session as the stock prices closed below the low of the pattern. Considering the evidence, a short term profit booking in this stock cannot be ruled out. We recommend selling for a short term price target of Rs 2,130. The stop loss needs to be maintained at Rs 2316.

Disclaimer: Sameet Chavan is Chief Analyst - Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.