Trade Setup for April 19: Infosys may lend more pressure on the Nifty as Lok Sabha polls begin

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Until nearly noon, the market gave the impression of seeing some bounce from oversold levels and was also respecting upside resistance levels near the 22,300. What followed was a complete whipsaw that caught both bulls and the bears off guard. Within seconds, the Nifty fell 200 points from the day’s high, only to recover another 100 points equally swiftly.

However, the index failed to hold on to higher levels. The Nifty, for the first time since March 20, closed below the 22,000 mark. Almost every large bank contributed to the losses on the Nifty weekly expiry session. The index has now given up over two-thirds or over 700 points of the 1,065-point rally it saw from its previous swing low of 21,710.

IT, which had been a laggard and a major pain point for the market over the last few trading sessions, ended up on the positive end of the fence on Thursday. But that however, is likely to be short-lived.

Infosys, which ended over 1% higher on Thursday and was the third-highest point contributor to the Nifty gains, delivered quarterly results that missed estimates on all fronts. The IT heavyweight expects revenue growth for the current financial year to be between 1% and 3%, well below the CNBC-TV18 poll expectations of 2% to 6%. You can read more about Infosys’ earnings here. At the time of writing this, Infosys’ shares listed in the US were down 6%.

The big event for the year, the first phase of India’s Lok Sabha polls begins tomorrow. Polling will take place for 102 Lok Sabha seats in this phase across Tamil Nadu, Rajasthan, Some parts of Maharashtra, West Bengal and Uttar Pradesh. 16.62 crore voters will exercise their right to vote in the first phase of polling.

The Nifty is already down 2% for this truncated week and another down day on Friday will make it the worst week that the index would have had in six months.

For Thursday’s trading session, the foreign institutions remained heavy sellers in the cash market, while the domestic investors tried offsetting the selling pressure with a buying figure, but could not prevent the market from falling further.

21,950 for the Nifty is now a crucial support, according to Ruchit Jain of 5paisa.com. In case that support does not hold, the index may fall towards its 89-Day Exponential Moving Average, placed around levels of 21,740. In case of a pull back, 22,330 – 22,380 is an immediate hurdle. He advises avoiding aggressive positions on either side owing to the intraday volatility.

Osho Krishnan of Angel One said that the Nifty level of 21,800 may see the bears halt their aggression but if that level does not hold, then the 100-Day Moving Average of 21,600 is possible for the index on an immediate basis. On the upside, the Nifty has a series of resistances, from 22,150 to the 22,300 mark.

The Nifty sustaining above 22,000 is key for a relief rally towards 22,300 – 22,500 levels, said Hrishikesh Yedve of Asit C Mehta Investment Intermediates. However, a move below 21,950 may drag the index further down to 21,800 or even 21,700 levels.

With all the heavyweight banks selling off on Thursday, the Nifty Bank had to emerge an underperformer. At one point, the index had slipped below the 47,000 mark but managed to close above those levels, shedding over 400 points in the process. The index has already lost 2,000 points in the last four trading sessions. For this truncated week, the Nifty Bank is already down 3%, and is on course for its worst weekly performance since January this year.

The Nifty Bank remains under a bear grip with any upside moves facing aggressive selling, indicating a “sell-on-rise” template, said Kunal Shah of LKP Securities. In case this pressure continues, he expects the index to test its 100-Day Moving Average of 46,500 on the downside. On the flip side, 48,000 remains a key hurdle.

Ashwin Ramani of SAMCO Securities observed strong call writing on the Nifty Bank strikes of 47,500, 47,700 and 47,800. On the downside, 47,000 is a key support, a breach of which may accelerate the selling pressure, he added.

What are the F&O Cues Indicating?

Nifty 50’s April futures added 4.1% and 4.55 lakh shares in Open Interest. They are trading at a premium of 59.35 points from 52.85 points earlier. On the other hand, Nifty Bank’s April futures added 2.8% and 51,840 shares in Open Interest. Nifty 50’s Put-Call Ratio is at 0.92 from 0.76 earlier.

Exide Industries is back in the F&O ban.

Balrampur Chini, Bandhan Bank, GNFC, Hindustan Copper, Vodafone Idea, Metropolis, NALCO, Piramal Enterprises, SAIL and Zee Entertainment continue to remain in the F&O ban.

Nifty 50 on the Call side for April 25 expiry:

On the Call side, the Nifty 50 strikes between 22,000 and 22,300 have seen Open Interest addition for next Thursday’s weekly options expiry.

Nifty 50 on the Put side for April 25 Expiry:

On the Put side, the Nifty 50 strikes between 21,500 and 22,000 have seen Open Interest addition for next Thursday’s weekly options expiry.

These stocks added fresh long positions on Thursday, meaning an increase in both price and Open Interest:

These stocks saw fresh short positions on Thursday, which means a decline in price and increase in Open Interest:

Some stocks witnessed some short covering on Thursday, meaning an increase in price but decline in Open Interest:

Unwinding of long positions was seen in these stocks, meaning a decline in both price and Open Interest:

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

• Infosys: FY25 revenue growth seen between 1% to 3%, lower than CNBC-TV18’s poll of 2% to 6% growth. The company also missed estimates on the US Dollar revenue, margin and profit front. The profit optically looks a beat but that is due to an other income component. It also declared a total dividend of ₹28 per share.
• Bajaj Auto: Net profit of ₹1,936 crore higher than CNBC-TV18 poll of ₹1,870 crore. Revenue of ₹11,485 crore also higher than the estimate of ₹11,118 crore. EBITDA and margin also higher than estimates. On a year-on-year basis, margin expanded by 80 basis points, while EBITDA grew by 34.4%. Revenue grew 29%, while profit was up 35.1%. The company also declared a dividend of ₹80 per share.
• ITC: Wholly-owned subsidiary ITC Infotech India entered into a share purchase agreement to acquire 100% shares in Blazeclan Technologies Pvt. Ltd. The acquisition will be done for a cash consideration of ₹485 crore and is expected to be closed in the next six to eight weeks. Blazeclan is a partner with AWS, Snowflake and has expertise in cloud migration and digital services. This acquisition is expected to augment ITC Infotech’s capabilities to service its customers in a multi-cloud and hybrid cloud environment.
• Gokaldas Exports: Launches QIP to raise funds. Floor price of ₹789.99 is a 3% discount to Thursday’s closing price. Board to meet again on April 23 to determine the issue price of the QIP.
• Mahindra Lifespaces: Sells homes worth ₹350 crore in two days at Mahindra Zen in Bengaluru, which is the city’s first net zero waste + energy homes.
• TV18 Broadcast: Consolidated revenue up 66% year-on-year to ₹2,330 crore. Operating EBITDA loss of ₹161 crore compared to EBITDA profit of ₹77 crore last year. TV News EBITDA up 2% to ₹66 crore from ₹65 crore last year. The management said that EBITDA impacted by operating losses from sports and digital segments. JioCinema was the fastest growing OTT in the country.
• Network18: Consolidated revenue up 63% year-on-year to ₹2,419 crore. Consolidated operating EBITDA loss of ₹190 crore from EBITDA of ₹57 crore last year.
• ICICI Securities: Net profit at ₹536.5 crore from ₹262.7 crore last year. Revenue up 74.4% to ₹1,543.2 crore. Consolidated EBITDA up 96.2% to ₹1,079.3 crore, while EBITDA margin at 69.9% from 62.2% last year.
• Rail Vikas Nigam: Signs MoU with Turkish Engineering Consulting and Contracting – TUMAS India for partnership and collaboration in public transportation and infrastructure projects in India.
• Indus Towers: Signs MoU with NTPC Green Energy to address the need for pacing green energy objectives and the government’s efforts towards a carbon neutral economy.
• Mastek: Delays board meet to consider results, which will now be declared on April 26.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow