Trade Setup for April 24: Is the recent Nifty recovery set for a temporary pause?

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

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Two of the biggest Nifty 50 constituents in terms of weightage – HDFC Bank and Reliance Industries have both reported their results, and neither played any part in taking the Nifty further higher despite some positive surprises in each of their results. Reliance Industries fell over a percent, despite a strong operational performance, while HDFC Bank also fell for the second day in a row on Tuesday post Saturday’s results.

Both these stocks ensured that the Nifty could not carry on with the momentum of the last two trading sessions. Although the index did end higher for the third day in a row, it traded in a very narrow 100-point band and could not sustain above the 22,400 mark.

While the Nifty took a pause after a two-day rally, the broader markets continued their merry ways. Both Midcap and the Smallcap indices rose a percent each and gained for the second day in a row. In fact, the Smallcap index has closed near its previous record high of 16,691, while the Midcap index is just 0.7% away from reclaiming the 50,000 mark.

The global cues return to the spotlight as well as a host of bigtech megacap companies report earnings as the week goes by. Consumption expenditure data for the month of March will also be reported later this week, which is a preferred inflation gauge for the US Federal Reserve.

Back home, while Hindustan Unilever, Axis Bank and LTIMindtree among the Nifty 50 report results tomorrow, the market will also react to results from Tata Grup stocks like Tata Consumer and Tata Elxsi, along with names like MCX, and ICICI Prudential. Among broader market names reporting results on Wednesday include names like Indian Hotels, Macrotech, Dalmia Bharat, Nippon Life AMC, Oracle Financial and Syngene among others.

The bulls though, can also take heart from the fact that the India VIX or the volatility gauge fell nearly 20% on Tuesday, marking its biggest single-day drop in five years. It comes across as if the market is not anticipating any new hurdles for the time being.

Ruchit Jain of 5paisa.com said that the FII derivative stats remain bearish and the RSI oscillator on the daily and weekly charts remains negative, which does not give confidence for the Nifty to have a sustained rally towards a new high. 22,400 – 22,500 range remains a hurdle for the Nifty, where he advises booking profits on trading longs. He also suggests a re-entry entire on a breakout above 22,500 or on any dip. Immediate support is at 22,200, followed by 22,030 and 22,000 zones.

While the short-term Nifty trend is choppy, the near-term uptrend is intact, said Nagaraj Shetti of HDFC Securities. Only a sustained move above 22,500 can see the next leg of upside towards levels of 22,700. Immediate support is at 22,200 levels.

Nifty traders are awaiting a breakout on either side is the view of Kotak Securities’ Shrikant Chouhan. 22,450 is an immediate breakout level for the Nifty, above which, it can rally towards levels of 22,550 – 22,600. On the flip side, selling pressure may accelerate on a slip below 22,300.

Ahead of its weekly expiry on Wednesday, the Nifty Bank also remained rangebound showing no significant activity in price action. HDFC Bank kept the gains in check, while Axis Bank remained flat ahead of its quarterly earnings on Wednesday. The index went to as high as 48,300 but could not sustain at or above those levels, eventually closing below the mark of 48,000.

Neeraj Sharma of Asit C Mehta Investment Intermediates said that the Nifty Bank will see a short-term hurdle between 48,300 – 48,500 levels, and only sustaining above 48,500 can take the index towards levels of 49,000 – 49,500. Short-term supports are at 47,000 and 46,600 on the downside.

The Nifty Bank has made a strong base around levels of 47,500 – 47,600, according to Om Mehra of SAMCO Securities. The index is holding above the 20-Day Moving Average and he expects the index to fell the gap on the upside up to levels of 48,500.

What Are The F&O Cues Indicating?

Nifty 50’s futures across series added 5.7% in Open Interest on Tuesday. Current rollovers are at 47%. The futures are now trading at a premium of 3.05 points from 21.8 points earlier. On the other hand, Nifty Bank’s futures across series shed 4.1% in Open Interest on Tuesday. Current rollovers are at 56%. Nifty 50’s Put-Call Ratio is at 1.06 from 1.14 earlier.

Biocon, Piramal Enterprises and SAIL are out of the F&O ban.

Hindustan Copper, Vodafone Idea and Zee Entertainment remain in the F&O ban list.

Nifty 50 on the Call side for April 25 expiry:

For Thursday’s monthly expiry, the Nifty 50 Call strikes between 22,400 and 22,500 have seen Open Interest addition, while the 22,000 strike has seen shedding in Open Interest.

Nifty 50 on the Put side for April 25 expiry:

On the Put side, the Nifty 50 strikes between 22,100 and 22,400 saw Open Interest addition for this Thursday’s monthly expiry, while the 22,000 strike saw shedding in Open Interest.

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

These stocks saw fresh short positions on Tuesday, meaning a decline in price and increase in Open Interest:

Short covering was seen in these names on Tuesday, meaning an increase in price but a drop in Open Interest:

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

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

• Tata Consumer Products: Net profit of ₹267.7 crore, below the CNBC-TV18 poll of ₹315 crore. Net profit declined by 22.5% year-on-year. The profit was impacted due to an exceptional loss of ₹215.8 crore. Revenue nearly in-line with expectations at ₹3,927 crore. EBITDA of ₹629.6 crore marginally higher than estimates, while margin of 16% is 90 basis points higher than the CNBC-TV18 poll of 15.1%. India packaged beverage business delivered 2% revenue growth. Revenue growth of 45% was seen in the coffee business. NourishCo recorded 13% revenue growth during the quarter, taking the full year growth to 33%.
• Tata Elxsi: Net profit down 4.6% to ₹196.9 crore, while revenue down 1% sequentially to ₹905.9 crore. EBIT down 4.5% quarter-on-quarter, while margin down 100 basis points to 25.8%. The board has also recommended a dividend of ₹70 per share. The transportation division continued to grow strongly with a revenue growth of 24.6% for financial year 2024, supported by deal wins in electric, software defined vehicles and OEMs. Media and communications grew 0.2% from last year in a challenging business environment for the industry.
• ICICI Prudential: Annual Premium Equivalent up 9.5% from last year to ₹3,615 crore from ₹3,300 crore. Value of new business down 26.5% to ₹776 crore, while VNB margin down to 21.5% from 32% last year.
• Cyient DLM: Net profit up 80.2% to ₹22.7 crore. Revenue up 30.4% from last year to ₹361.8 crore. EBITDA up 18.8% to ₹37.9 crore, while margin down 100 basis points from last year to 10.5%. Large deals in Aerospace and Defence contributed to a major part of the order book. Added two new logos in the Aerospace & Defence segment and won key large deals in financial year 2024. Outlook for financial year 2025 remains strong, backed by order book and strong relationships with key clients.
• NELCO: Net profit up 7% from last year to ₹6.1 crore. Revenue flat but down 0.5% to ₹81.6 crore. EBITDA down 12.5% to ₹14.7 crore, while EBITDA margin down to 18% from 20.5% year-on-year.
• Dr. Reddy’s Laboratories: Voluntarily recalls six lots of Sapropterin Dihydrochloride Powder for Oral Solution 100 mg to the consumer level due to powder discoloration in some packets leading to decreased potency. It discovered the issue during an accelerated stability test in addition to customer complaints.
• IIFL Finance: Special audit, as directed by the Reserve Bank of India has commenced today. Special audit follows RBI’s embargo which suspended disbursement of new gold loans by the company. Committed to extending full co-operation to special audit team to ensure a comprehensive and thorough audit.
• Lupin: Aurangabad manufacturing facility gets Establishment Inspection Report (EIR) from the USFDA. The regulator has determined that the inspection classification of the facility is Voluntary Action Indicated (VAI). The inspection was conducted between March 6 – March 15, 2024.
• Rama Steel Tubes: Board approves raising ₹500 crore via share sale.
• NHPC: Signs supplementary Joint Venture agreement with JV Partners of NHPTL for sale of partial stake in NHPTL or National High Power Test Laboratory Pvt. Ltd. The NHPTL includes NTPC, Power Grid, DVC, CPRI.
• Gokaldas Exports: Raised ₹600 crore through its QIP. Board approved allotment of 77.41 lakh shares to eligible Qualified Institutional Buyers. Issue price fixed at ₹770 per share, which is a 1.9% discount to the floor price. Nippon Life, Goldman Sachs, Aditya Birla Fun Life AMC, Custody Bank of Japan or Amundi, Fidelity Funds among those issued shares.
• 360 One WAM: Revenue up 31% sequentially to ₹573 crore led by a sharp surge in transaction and brokerage income, which doubled to ₹216 crore. Operating profit up 32% quarter-on-quarter despite rise in operating expenses and employee costs. Total AUM up 3% from December at ₹4.66 lakh crore. Board approves dividend of ₹3.5 per share.

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