Nifty 50 set for fifth positive F&O series in six months

The September F&O series will go down as a series of two halves. The first half, which saw the Nifty 50 scale a new record high, cross levels of 20,000 and beyond that too. But the second half began with HDFC Bank’s downgrade and it all went downhill from there. Record breaking two weeks were followed by the worst week in seven months.

This week has just been one of consolidation. However, for the first 90 minutes of Wednesday, the price action almost felt as if more pain was likely for the Nifty 50. Chartists had highlighted 19,550 as a key support for the Nifty 50 and it reversed from exactly those levels after making an intraday low of 19,554.

Index heavyweights like Reliance Industries, ITC, HUL, Axis Bank put their hands up in leading the Nifty 50 recovery. The index eventually closed 170 points off the day’s low. For the September series, the Nifty 50 is up over 460 points, making it its fifth positive F&O series in the last six months,.

What Are The Experts Saying?

Nomura upgraded India to overweight on Wednesday, saying that the recent weakness driven by higher oil prices is an opportunity to raise the exposure.

“While this weakness may persist in the near term, thus presenting even better timing, we think the window of opportunity might not be open for too long. Valuations are expensive but will likely remain so in a scenario of policy/government continuity. Intense politicking into May 2024 elections, China rerotation and sustained high oil prices are potential risks,” Nomura’s Chetan Seth wrote.

What Do The Nifty 50 Charts Indicate?

Has the Nifty 50’s recovery on Wednesday given a ray of hope to the bulls and the chartists? Lets find out:

Nagaraj Shetti of HDFC Securities termed the market action as an indication of the formation of a bullish engulfing pattern on the charts. After a false breakdown on Wednesday, he sees a higher possibility of an upside breakout at 19,750 levels. Immediate support for the Nifty 50 is around 19,600 – 19,550 and a decisive move above 19,750 can take the index back towards 20,000.

The Nifty 50 has formed a bullish reversal formation near the 50-DMA which indicates a strong possibility of a fresh uptrend from current levels, said Shrikant Chouhan of Kotak Securities. 19,630 is now a key support for the traders, above which, the index can move towards 19,800 – 19,825.

Rupak De of LKP Securities said that a breakout above 19,750 is necessary for the Nifty 50 to have a substantial rally. A decisive move above that level could take the index towards 19,900. On the downside, support is seen at 19,600.

Nifty Bank Up 600 Points This Series So Far

At the day’s low on Wednesday, the Nifty Bank was down nearly 2,000 points from its September 15 high of 46,310. Despite the fall, the index is up 600 points in the September series so far. The index underperformed the Nifty 50 on Wednesday courtesy of HDFC Bank and ICICI Bank but recovered 400 points from the day’s low to end little changed.

Despite the recovery on Wednesday, the Nifty Bank remains below its 20-Day Moving Average of 45,000 and a break above that is necessary to trigger a short covering move, said Kunal Shah of LKP Securities. Currently, the Nifty Bank is trading in a broad range of 44,200 – 45,000 and a buy on dips approach may be favourable on the index, he said.

Vedanta Shares Fall To A 31-Month Low

Shares of Vedanta fell 7 percent on Wednesday to end at the lowest level since January of 2021. The fall came after Moody’s downgraded some of the bonds issued by the company’s parent and its wholly-owned subsidiary. The stock has declined over 30 percent so far in 2023.

“I think at current valuations, we are expecting the earnings to be somewhere around Rs 30 over the next two-three years. 8-9 times is very easily possible. So I think fair value would be somewhere around Rs 270 – Rs 280. As a long-term investor, these at valuations one should not be worry about exiting the stock, the big risk is that the group defaults and something catastrophic happens, but considering the assets they have on the book, I don’t think that is something that is going to happen,” Sharad Avasthi of SMIFS told CNBC-TV18 on Wednesday.

What Are The F&O Cues Indicating?

Lets take a look at the stocks which saw short covering ahead of Thursday’s expiry session, meaning an increase in price but fall in Open Interest:

Lets take a look at the stocks which saw unwinding of long positions on Wednesday, meaning a drop in both price and Open Interest:

Here are the stocks to watch out for ahead of Thursday’s session: