NSE Nifty 50 index saw sharp volatility during December and January forcing the index to plummet close to important support levels of 16,400. With a strong start to February, analysts at ICICI Direct believe Nifty is offering a good buying opportunity for investors, and expect the index to head towards 18,300. “… investors should use the current volatility in the markets to accumulate quality stocks as we expect the Nifty to surpass the immediate hurdle of 17,600 and eventually head towards 18,300 in coming months,” they said. Nifty 50 is hovering around 17,700 on Wednesday morning.
Nifty heading to 18,300
Analysts said that the Nifty 50 index has been forming a potential higher bottom against the December low of 16,410, highlighting structural improvement. So far in February, the headline index has already zoomed nearly 400 points, helped by the Union Budget yesterday. “Since April 2020, the Nifty has exceeded preceding swing high after undergoing average 10% correction while sustaining above 100 days EMA. Currently, the Nifty has already corrected 8% from the January 2022 high of 18,350. Thereby providing favorable risk-reward set-up,” they said.
“Time-wise, since May 2020 the index has not closed negative for more than two successive weeks. In the current context, with two weeks of losses behind us, the index is poised for a technical pullback in line with the past 22-month rhythm,” analysts said. 16,400 is seen as key support for Nifty.
Bank Nifty may continue strong run
The Banking gauge has also been strengthened recently. Bank Nifty has zoomed 9% so far in 2022 and is expected to continue its gaining momentum. “Going ahead, we expect the index to continue its relative outperformance and head higher towards 40,300 as it is the confluence of the 80% retracement of the NovemberDecember 2021 decline (41,829- 34,019) and the 161.8% external retracement of the last two weeks breather (38,855-36,375),” ICICI Direct said. Banking stocks are up with gains supported by both PSU and private banks today.
Sectors to watch
Among sectors, ICICI Direct is focusing on BFSI, Capital Goods, PSU, IT, and Metals. Banking stocks have been outperforming recently and analysts expect that momentum to continue. Bank stocks are joined by Capital goods stocks in the outperformance quadrant. IT stocks, after the recent profit booking, are believed to be placed at an attractive level and offer favorable risk-reward setup, according to ICICI Direct.
Meanwhile, metals stocks are now seen to be forming a higher base at good support levels, after the last six months of shallow retracement, thus providing bargain buy opportunity. “PSU stocks have also witnessed strong momentum as the PSU index has seen improvement in both relative and movement term. We expect it to extend the current rally. Auto has witnessed stock-specific activity which is likely to continue and the sector to perform at par with the market,” ICICI Direct added.
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