Trade Setup for July 8: Will dips on the Nifty keep getting bought into?

    All of last week on the Nifty was dominated by two stocks and one theme. The two stocks being Reliance Industries and HDFC Bank, while IT was the theme that continued to hog the limelight. If one took the market higher, the other ensured that the gains were kept in check and vice versa. In three out of the five trading sessions last week, it was IT, that lent support to the market.

    And while on Friday it felt as if the Nifty would eventually snap its streak of gains with some profit booking at higher levels courtesy of the fall in HDFC Bank and a no-show from IT, it was a sharp spike in Reliance Industries towards the close of trade that triggered a swift recovery in the index, ensuring that it ended in the green.

    With HDFC Bank being the only one pulling the Nifty lower after a weak quarterly business update, Reliance, L&T, SBI and HUL contributed to the recovery. For the week, the Nifty ended with gains of 1.3%.

    Wall Street resumed trading on Friday after a holiday and the S&P 500 and the Nasdaq posted yet another record close. The jobs report released on Friday pointed to a 2,06,000 increase in non-farm payrolls in June, while the unemployment rate rose to 4.1%, slightly higher than estimates of 4%. The jobs report pointed to increased hopes of a rate cut from the US Federal Reserve soon.

    Multiple stocks will react to their quarterly business updates that were reported on Friday and over the weekend such as Titan, IndusInd Bank, Marico, Dabur and others. Earnings season also begins in the upcoming week with TCS reporting results on July 11, followed by HCLTech on July 12.

    Friday’s session saw foreign institutions continue to remain net buyers in the cash market, while domestic institutions continued to book profits at higher levels.

    Amol Athawale of Kotak Securities wrote that for traders, 24,100 will become an important support zone for the Nifty, followed by 24,000, while 24,400 – 24,500 on the upside will act as a barrier for the index. He added that below 24,000, traders will exit from their long positions.

    The Nifty has formed a bullish candle on the daily chart with a minor upper and lower shadow, said Nagaraj Shetti of HDFC Securities. Technically, this market action signals formation of a bullish counterattack type candle pattern and a similar formation on June 24 had resulted in a sustained upmove in the coming weeks. He expects an upside breakout from 24,400 – 24,500 levels in the coming sessions, with 24,170 being a support on the downside.

    Angel One’s Osho Krishnan said that 24,200 is likely to provide a cushion for short-term blips, followed by 24,000. He expects 24,400 – 24,500 to be a resistance and the Nifty to consolidate for the next few sessions.

    On  a day when HDFC Bank falls over 4%, there is very little to expect for the Nifty Bank in terms of a recovery, even as the other banking stocks tried their best to put their hand up. If it was HDFC Bank that led the gains during the initial part of the week, it led it lower on Thursday and Friday as well. Yet, the Nifty Bank managed to post weekly gains of 0.6%, having recovered nearly 400 points from the lows of the day.

    Om Mehra of SAMCO Securities believes that in case the Nifty Bank slips below levels of 51,990 on the downside, it can be pushed further towards levels of 51,700, where a strong support lies. He expects the index to consolidate in the coming days and only a move above 53,100 will mark a resumption of the uptrend.

    The Nifty Bank is currently stuck in a range with resistance visible between 53,000 – 53,200 levels, where aggressive call writing has been observed, said Kunal Shah of LKP Securities. Support on the downside is between 52,300 – 52,100. He expects a breakout on either side to result in trending moves. Within the range, the trend remains bullish and he advises using dips as buying opportunities.

    What Are The F&O Cues Indicating?

    Nifty 50’s July futures shed 2.6% or 3.7 lakh shares in Open Interest on Friday. They are now trading at a premium of 55.55 points compared to 57.3 points earlier. On the other hand, Nifty Bank’s July futures shed 6.6% and 1.9 lakh shares in Open Interest on Friday. Nifty 50’s Put-Call Ratio is at 1.2 from 1.27 earlier.

    GNFC has entered the F&O ban.

    Aditya Birla Fashion, Bandhan Bank, Piramal Enterprises, India Cements and Hindustan Copper remain in the F&O ban.

    Nifty 50 on the Call side for July 11 expiry:

    On the Call side, the Nifty 50 strikes between 24,600 and 24,800 have seen Open Interest addition for this Thursday’s weekly expiry.

    Strike OI Change Premium
    24,800 21.6 Lakh Added 6.5
    24,700 16.7 Lakh Added 14.1
    24,750 15.3 Lakh Added 9.5
    24,600 11.7 Lakh Added 28.65

    Nifty 50 on the Put side for July 11 expiry:

    On the Put side, the Nifty 50 strikes between 24,000 to 24,200 saw Open Interest addition for this Thursday’s weekly expiry, along with the 23,500 strike.

    Strike OI Change Premium
    24,200 18.5 Lakh Added 68.9
    23,500 18 Lakh Added 4.1
    24,000 17.5 Lakh Added 27.55
    24,150 11.9 Lakh Added 53.25

    These stocks saw addition of fresh long positions on Friday, meaning an increase in both price and Open Interest:

    Stock Price Change OI Change
    United Breweries 1.46% 19.51%
    Divi’s Laboratories 1.90% 17.40%
    ONGC 4.30% 12.53%
    Bajaj Auto 1.67% 7.37%
    Laurus Labs 5.01% 6.81%

    Fresh short positions were seen in these stocks on Friday, meaning an increase in Open Interest but a decline in price:

    Stock Price Change OI Change
    GNFC -2.00% 12.62%
    HDFC Bank -4.51% 9.43%
    IndusInd Bank -0.59% 5.99%
    ICICI Bank -0.14% 5.81%
    Titan -1.93% 4.26%

    Short covering was seen in these names on Friday, meaning a decline in Open Interest but an increase in price:

    Stock Price Change OI Change
    TVS Motor 2.24% -9.26%
    Gujarat Gas 3.03% -7.49%
    Ambuja Cement 0.37% -7.18%
    Mphasis 1.11% -6.05%
    Hindustan Copper 1.10% -5.86%

    These are the stocks to watch out for ahead of Monday’s trading session:

    • IndusInd Bank: Advances growth of 16% from last year to ₹3.48 lakh crore. Deposits up 15% year-on-year to ₹3.98 lakh crore. CASA Ratio at 36.7% from 39.9% last year and 37.9% in March.
    • Titan: Jewellery domestic operations grew by nearly 8%. Overall growth of 9% year-on-year. High gold prices, coupled with low wedding days had an impact on consumer demand with overall sentiments being relatively muted. Watches and Wearables business grew by 15% from last year, while EyeCare business saw growth of 3% year-on-year.
    • Nykaa: Expects revenue growth to be around 22% to 23% in the first quarter. Gross Merchandise Value growth for the quarter is expected to be in the mid-twenties. Beauty vertical revenue growth for the quarter is expected to be around 22-23%, similar to the consolidated entity’s revenue growth. GMV growth is expected to be be higher, in the high twenties. Fashion vertical revenue is expected to deliver a healthy performance, with revenue growth of around 20%. GMV growth for the quarter is expected to be lower at the mid-teens.
    • Marico: Consolidated revenue grew in high-single digits and expect it to continue trending upwards towards the rest of the year. Gross margin also likely to expand on a year-on-year basis due to a favourable portfolio mix. Domestic business posted a modest uptick in underlying volume growth on a sequential basis. Parachute coconut oil posted low single-digit volume growth but is likely to pick-up visibly through the rest of the year, given the healthy trends in offtake growth. Saffola Oils delivered mid-single digit volume growth. Value Added Hair Oils had a soft start to the year due to competitive headwinds persisting.
    • Dabur: Sequential improvement in demand trends seen with rural growth picking up. Expect the improvement to accelerate in the coming months. Expect consolidated revenue to grow in mid-to-high single digit, while India business may see mid-single digit volume growth. HPC & Heathcare segment is expected to grow in high-single digits. International business is expected to post strong growth in constant currency terms. Gross margin may see some expansion.
    • Bank of Baroda: Domestic advances up 8.5% from last year to ₹8.82 lakh crore. Domestic retail advances up 20.8% to ₹2.22 lakh crore. Global advances up 8.1% to ₹10.72 lakh crore. Domestic deposits up 5.25% to ₹11.05 lakh crore.
    • Adani Wilmar: Robust volume growth of 13% propelled by market-specific strategies in each category, aimed at gaining market share, especially in under-indexed markets. Alternate channels saw 19% volume growth. Volume of branded exports increased by 36% year-on-year. Food and FMCG business volume growth at 23% from last year. Edible Oils business continued to thrive despite challenges in the industries. Edible Oil business saw volume growth of 13% and value growth of 10% year-on-year.
    • Indian Bank: Total business growth of 10.9% year-on-year to ₹12.21 lakh crore. Total deposits up 9.5% from last year to ₹6.81 lakh crore. Gross advances up 12.7% to ₹5.4 lakh crore.
    • Signature Global: Pre-sales grow 255% to ₹3,120 crore. Collections rise 102% from last year to ₹1,210 crore. Net debt declined by ₹180 crore to ₹980 crore. Realizations for the quarter increased to ₹15,369 per square feet. No. of units sold increased by 8% to 968 units from 894 units. Crossed 30% of ₹10,000 crore pre-sales guidance in the first quarter itself.
    • Apollo Hospitals: To acquire 35.12 lakh shares of ₹10 each at a price of ₹294 per share of Apollo Health and Lifestyle Ltd., a subsidiary company, for ₹103.26 crore through rights issue
    • Bandhan Bank: Appoints Ratan Kumar Kesh as interim MD & CEO for three months from July 10, 2024.
    • Jammu & Kashmir Bank: Deposits up 9.3% year-on-year but down 1.6% sequentially to ₹1.32 lakh crore. Advances up 11.6% year-on-year, but down 1.8% from March to ₹98,688 crore.
    • Union Bank of India: Deposits up 8.5% year-on-year but flat sequentially to ₹12.24 lakh crore. Advances up 11.5% from last year to ₹9.12 lakh crore. Domestic retail loans up 14.5% from last year to ₹5.08 lakh crore.

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