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Outlook For Wednesday: NIFTY Neutrally Placed; These Stocks May Relatively Outperform

It was a range-bound session for the equities on Tuesday as the markets posted incremental gains but also stayed in a defined range. The NIFTY opened on a positive note but pared its gains slowly in the morning session. However, the second half of the session saw some recovery again. The Markets was unable to move past the 11300-11350 zone convincingly at any point in time. There as a minor paring of gains again in the last hour of the trade. After oscillation in a very defined and limited range, the headline index ended with a gain of 52.35 points (+0.46%).

As mentioned in the previous note, the banking stocks outperformed the headline index in a strong way. Banknifty gained 1.49%. With the NIFTY not yet moved past the 11300-11350 zone, this zone continues to remain an important level to watch. The options saw some heavy call writing at 11400 and 11500 levels. This would limit the up move in the event of any attempt to post runway gains. The volatility declined significantly as the India Volatility Index, INDIAVIX, cooled off by 5.11% to 21.3600.

Wednesday will see some crucial moves by NIFTY as moving past 11350 would be crucially important. The levels of 11350 and 11420 will act as resistance points. The supports will come in at 11265 and 11150 levels.

The Relative Strength Index (RSI) on the daily chart is 64.32; it stays neutral and does not show any divergence against the price. The daily MACD remains bearish as it trades below its signal line. A Doji occurred on the candles. This represents lack of consensus at current levels and may potentially halt any move in the immediate short term. However, this will require confirmation on the next trading day.

The NIFTY is currently placed at a crucial juncture. The zone of 11300-11350 represents a strong resistance zone, and the Index has just ended in the middle of it. At present, it is placed in the middle of the upward rising channel that it has been placed in.

There is a fair amount of possibility that the NIFTY may attempt to move past the 11350 level. However, the weekly options expiry on Thursday will limit the move as heavy call writing is observed on the lower strikes. We recommend continuing to follow the momentum on the upside in a highly stock specific manner. The banking and financial services are better placed, and they may relatively outperform the headline index. We recommend approaching the markets while staying highly stock specific in approach. A cautiously positive approach is advised for the day.

Milan Vaishnav, CMT, MSTA
Consulting Technical   Analyst
Member: (CMT Association, USA | CSTA, Canada | STA, UK)  | (Research  Analyst, SEBI Reg. No. INH000003341)

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