Motilal Oswal is bullish on these 7 largecaps, 3 midcaps; should you buy?

Motilal Oswal Financial Services

The Nifty has broken out from its recent trading range (10,450-10,650) after consolidating for the last nine trading sessions. It has been making higher lows for last three sessions and reclaimed its 50 daily exponential moving average (DEMA). It closed near its 38.2 percent retracement of the entire down leg from 11,760 to 10,004 and is making way for the next retracement zone at 10,850-10,880 levels.

It formed a small bullish candle on the daily scale and a Hammer or Pin Bar on the weekly scale. This suggests that the bulls are maintaining their tight grip and any decline is being bought into. The Nifty has to continue to hold above 10,650 to witness an up move towards 10,750, then 10,850-10,880 levels. On the downside, supports are shifting to 10,550 and 10,500 zones.

The Nifty continued its winning streak for the third consecutive week, with supports shifting slightly higher. India VIX moved up 3.32 percent to 18.35 levels last week, but overall volatility is now narrowing down for the last three sessions. It has to cool down below 17-16 zones to rally higher.

Chandan Taparia

Derivative & Technical Analyst|Motilal Oswal Securities

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Aggregate put-call ratio based on open interest (OI) for the Nifty moved up from 1.51 to 1.67 levels, suggesting that supports could remain intact at lower levels. On the option front, maximum put OI stands at 10,000, followed by 10,200 strikes. Maximum call OI stands at 10,800, followed by 11,000 strikes. Put writing is seen at 10,600, followed by 10,700 strikes, while call writing is seen at 10,800, followed by 10,700 strikes. The option band signifies an immediate trading range between 10,550 to 10,800 levels.

The Bank Nifty has already broken out above 25,900 and is headed towards 26,300 levels. It managed to extend its gains and closed at the highs of the last eight weeks. It formed a bullish candle on the daily as well as weekly scale, which indicates that the bulls are maintaining a tight grip. It has to continue to hold above 26,000 to extend its move towards 26,750 levels. On the downside, support is seen at 25,800-25,750 zones.

We are positive on Reliance Industries, HDFC Bank, Divis Laboratories, State Bank of India (SBI), Canara Bank, Bank of Baroda, Bajaj Finance, RBL Bank, Britannia Industries and Colgate-Palmolive (India). Weakness could be seen in JSW Steel, GAIL (India), Exide Industries, Indiabulls Housing Finance, and Oil and Natural Gas Corporation (ONGC). The Nifty has broken out after consolidating for the past nine trading sessions, while many stocks are witnessing negative price patterns, hence we advise a stock-specific approach rather than a broad-based buying.