Nifty and Bank Nifty Outlook: What to Expect Next Week
Nifty witnessed a sharp recovery following the monthly F&O expiry, closing near its all-time high with gains of 429 points or 1.7%. The broader market also ended in the green, up by more than 1%. Analyst Sudeep Shah, Deputy Vice President and Head of Technical & Derivatives Research at SBI Securities, shared his insights on the outlook for Nifty and Bank Nifty.
Nifty’s Bullish Run Continues
Nifty’s recent rally, despite the volatility surrounding the Union Budget, is a bullish sign. The index has formed a Bullish Hammer pattern and resumed its northward journey. The daily RSI has rebounded sharply, indicating a strong bullish sentiment. Shah suggests focusing on the bigger picture and following the Dow Theory, which emphasizes the importance of price action.
Shah highlights key support and resistance levels:
- Support: 24,450 – 24,500
- Resistance: 25,200 – 25,450
Rollover Data and Index Trading Strategies
The rollover data for Nifty Index futures was lower than the previous month, indicating potential volatility. Shah suggests deploying a bull call spread strategy for index traders, buying the 24,900 Call and selling the 25,050 Call. This strategy could potentially yield maximum profitability if the index closes above 25,050 on Thursday.
Bank Nifty’s Underperformance and Outlook
Bank Nifty has been underperforming for the past three weeks, with quarterly bank results failing to impress investors. However, the index rebounded on Friday, finding support near the 38.2% Fibonacci retracement level. Shah believes that as long as the index remains above 50,400, a pullback rally is likely.
- Support: 50,400 – 50,500
- Resistance: 52,000 – 52,500
Seasonality Trends for August
Historically, August has been a mixed month for Nifty and Bank Nifty. Both indices have shown both positive and negative performances in the past. Nifty has experienced an average volatility of over 7.66% in August, while Bank Nifty has exhibited an average volatility of approximately 10.98%.
Bank Nifty’s Bounce Back Potential
Shah believes Bank Nifty’s rebound from its 50-Day EMA is a bullish sign. The daily RSI has also rebounded, further supporting the idea of a pullback rally in the short term.
Sectors and Stocks to Watch
Based on the rollover data, Nifty Pharma, Nifty Healthcare, Nifty IT, Nifty Auto, Nifty Oil & Gas, Nifty FMCG, and Nifty CPSE are likely to outperform the frontline indices. Shah suggests keeping an eye on Balkrishna Industries, Apollo Hospitals, Bharti Airtel, Indian Hotels, and Bharat Forge for potential upside.
Remember, these are just insights from an expert and should not be considered investment advice. Always conduct thorough research and consult with a financial advisor before making any investment decisions.
