Nifty headed for 16,400 soon; IT, auto, and bank stocks may outperform, charts show

NSE Nifty 50 reached fresh all-time highs earlier this month only to witness profit booking from the highs and push the index lower. Now after having seen a healthy correction, the NSE Nifty 50 may soon resume its northward march, and this time scale fresh highs near 16,400, said brokerage firm ICICI Direct. “We expect the Nifty to maintain its northbound journey and gradually head towards our earmarked target of 16200-16400 range, led by IT, BFSI, auto and infra,” analysts at ICICI Direct said in a note. Earlier this month, Nifty climbed to 15,901 — an all-time high and has since witnessed a healthy correction. Now technical analysts say the index faces resistance near the 15,900 levels.

Strong buying to emerge around 15,400-15,200

“The Nifty has rallied 12% over the past two months leading it into overbought territory. Therefore, intermediate bouts of volatility at higher levels should not be seen as negative. Instead, dips should be capitalised on as incremental buying opportunity,” ICICI Direct said. The brokerage firm expected renewed buying interest to emerge around the 15,400-15,200 range as it is a confluence of 61.8% retracement of past four week’s rally (14,885-15,901), at 15,274 and past five week’s low is placed at 15,145.

Bouts of volatility expected

The path towards 16,400, however, would not be linear. ICICI Direct expects bouts of volatility if Nifty enters overbought territory and faces turbulence during April-June quarter results ahead. “Over the past one year such temporary volatility/consolidation always offered incremental buying opportunity. Hence, we recommend sticking to quality and, subsequently, adhering to buying on declines, as we expect strong buying demand to emerge around 15400-15200,” they said.

IT, Bank, PSU stocks in focus

On the charts, ICICI Direct said that the IT index is placed at the outperformer quadrant with improvement in both relative and movement term. “It is expected to continue with its outperformance,” they added. FMCG stocks are also expected to continue their up move along with PSU stocks. “Bank index has consolidated for the last three weeks and are currently placed at the Bargain Buy quadrant and are expected to resume its primary up move,” the note said.

The auto sector has moved from the neutral quadrant to outperform. This according to the report signals a resumption of uptrend and provides a favourable risk-reward setup. The high-flying pharma sector is placed in the neutral quadrant.

In the BFSI space, the brokerage firm has categorised SBI and Bajaj Finance as outperformers while Kotak Bank, HDFC Life, and HDFC are termed as bargain buys. Similarly, TCS, Infosys, Mindtree, Sonata software are outperformers among IT stocks while L&T Infotech is a bargain buy.

(The stock recommendations in this story are by the respective research and brokerage firms. The Outlooker Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)