Trade Setup for May 3: Will heavyweight banks keep the Nifty gains in check?

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

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The truncated week has turned out to be a decent one for the Nifty but the last two days have been dodgy. Index heavyweights in the form of private banks are keeping the Nifty upside in check. The weekly options expiry session on Thursday followed a script similar to Thursday.

While there was negative newsflow surrounding Kotak Mahindra Bank, ICICI Bank and Axis Bank also followed suit. In fact, considering its weightage in the index, ICICI Bank turned out to be a bigger drag compared to Kotak, while Axis also put pressure on the downside.

Together, ICICI Bank, Kotak Bank and Axis Bank contributed 43 points to the index downside, a move which was partly offset by one HDFC Bank, which contributed 20 points to the upside. As a result, the Nifty traded in a 140-point range but could not sustain above the 22,700 mark.

Despite the volatility in the last two sessions, the Nifty is still up a percent this truncated week. This will be the second straight weekly gain for the index, if it manages a close above the mark of 22,419.

For Friday’s trading session, stocks like Coal India, Ajanta Pharma, Coforge, KEI Industries among others will react to their results reported after market hours on Thursday.

Among the results being reported, Britannia and Titan are among the Nifty names, while Adani Green Energy, Inox Wind, Godrej properties, JSW Infra, Tata Technologies, MRPL from the broader markets will also report numbers for the March quarter.

For Thursday’s trading session, foreign institutions returned to being net sellers in the cash market, while domestic institutions continued their buying spree.

Nagaraj Shetti of HDFC Securities said that the short-term trend of the Nifty is choppy but rangebound. Any upside from here can face strong resistance at 22,800 with immediate support at 22,550 and a slide below that can trigger some more weakness ahead.

The current market texture is non-directional according to Shrikant Chouhan of Kotak Securities. For the bulls, he sees 22,750 as an immediate breakout level, above which the Nifty can move up towards levels of 22,850. On the flip side, a slip below 22,570 may drag the index lower towards levels of 22,400.

Sustaining at higher levels showcases a bullish undertone for the Nifty is the view of Angel One’s Osho Krishnan. However, 22,800 remains a key hurdle for the bulls, only above which, the Nifty can head towards levels of 23,000.

The Nifty Bank is the weaker among the two indices courtesy of the underperformance of heavyweight banks. The index is now down over 750 points from Tuesday’s high of 49,975 and ended lower for the second day in a row on Thursday. Despite the choppy moves from record highs, the index is still up over 2% for the week.

On the daily charts, the Nifty Ban has formked a shooting star candlestick pattern near the upper end of the trend line resistance and has sustained below the shooting star candle on Thursday, indicating further weakness, said Neeraj Sharma of Asit C Mehta Investment Intermediates. He further said that till the index does not cross its previous high of 49,975, a retracement towards 48,500 levels cannot be ruled out.

What Are The F&O Cues Indicating?

Nifty 50’s May futures added 2.5% or 2.71 lakh shares in Open Interest on Thursday. They are now trading at a premium of 125.75 points compared to 113.45 points earlier. On the other hand, the Nifty Bank’s May futures shed 4.1% or 92,310 shares in Open Interest. Nifty 50’s Put-Call Ratio is now at 1.27 from 1.1 earlier.

Aditya Birla Fashion and Retail has joined Biocon and Vodafone Idea among the stocks in the F&O ban.

Nifty 50 on the Call side for May 9 expiry:

For next week’s expiry, the Nifty 50 Call strikes between 22,700 and 23,000 have seen Open Interest addition.

Nifty 50 on the Put side for May 9 expiry:

On the Put side, the Nifty 50 strikes between 22,500 and 22,700 have seen Open Interest addition for next Thursday’s expiry.

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

These stocks added fresh short positions on Thursday, meaning a decline in price but increase in Open Interest:

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

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

• Bajaj Finance: The Reserve Bank of India has lifted the restrictions on eCOM and online digital insta EMI card with immediate effect. The company can now resume sanctions and disbursal of loans in these two business segments including the issuance of EMI cards. The RBI had restricted the sanctions and disbursal of loans under eCOM and the Online Digital insta EMI card on November 15, while it had suspended the issuance of EMI cards to new customers on November 17 last year.
• Yes Bank: A large block is likely to take place in the lender on Friday where Carlyle is set to sell shares worth ₹1,500 crore or 2% equity via block deals. Post the warrant conversion, Carlyle’s entity named CA BASQUE Investments holds a 8.74% stake.
• Coal India: Net profit up 25.8% to ₹8,640.5 crore. Revenue down 1.9% to ₹37,410 crore. EBITDA up 21.5% to ₹11,337.6 crore, while EBITDA margin expands by 580 basis points to 30.3% from 24.5%. The board has also recommended a dividend of ₹5 per share.
• Coforge: Board approves acquisition of 54% stake in Cigniti Technologies Ltd. The acquisition of Cigniti will not only help Coforge become a $2 billion company by financial year 2027, but also ensure that the company’s operating margin improves by 150 – 200 basis points by financial year 2027 itself. The acquisition will create three new scaled up verticals – retail, technology and healthcare. It will also help Coforge realize its objective of scaling up its presence across south-west, mid-west and western US markets. The merged firm’s retail vertical will operate at nearly $100 million per annum in size, while hi-tech and healthcare will operate at a $50 million per annum size.
• Coforge: US Dollar revenue for the quarter at $286.8 million. Delivers on annual growth guidance given at the beginning of financial year 2024. TCV worth $400 million signed during the quarter. Expect margins to expand in financial year 2025. Total order book executable over the next 12 months at $1.01 billion. Board also recommends an interim dividend of ₹19 per share.
• Ajanta Pharma: Board approves share buyback worth ₹285 crore via the tender offer route. The company intends to purchase up to 10.28 lakh equity shares at a price of ₹2,770 per share, which is a 24.5% premium to Thursday’s closing price. May 30, 2024 has been fixed as the record date for the share buyback. Ajanta Pharma reported a net profit of ₹202.7 crore for the March quarter, a growth of 65.7% from last year, while revenue increased by 19.5% from last year. The company has guided for mid-teens growth in financial year 2025 with the domestic business likely to grow between 10-11%. It plans on having 6 new launches in the US market and 8-12 ANDA filings in financial year 2025.
• Ceat: Net profit down 22.7% to ₹102.3 crore, Revenue up 4.1% to ₹2,992 crore. EBITDA up 6.5% to ₹391.7 crore. EBITDA Margin at 13.1% from 12.8% last year. Blended realisations similar to the December quarter. Gross margin expansion by 96 basis points sequentially. Margin improvement led by raw material cost reduction and operational efficiencies. Debt reduction of another ₹100 crore sequentially.
• KEI Industries: Revenue up 18.6% to ₹2,319.2 crore. EBITDA up 19.9% to ₹244.5 crore. EBITDA margin at 10.54% from 10.43% last year. Domestic sales for institutional cable and wires up 13.3% to ₹896 crore. Exports up 12.1% to ₹139 crore. EPC Projects revenue up 52.5% year-on-year to ₹340.4 crore. Pending order book at ₹3,531 crore.
• Voltamp Transformers: Net profit up 22.1% to ₹93.5 crore. Revenue up 14.6% to ₹504.2 crore. EBITDA up 8.4% to ₹100.8 crore. EBITDA margin at 20% from 21.1% last year. The company has identified a suitable land parcel to put up a new power transformer factory near Vadodara’s Jarod village. Approvals will be in place by the end of June 2024. The new capex will be funded from internal accruals. Order book at the end of FY24 at ₹1,859 crore, up 37% from last year. Opening order book as of April 1, 2024 is ₹840.66 crore.
• Interglobe Aviation: Sources told CNBC-TV18 that the airline has announced a special bonus to staff across the board ahead of its fourth quarter results. Staff to get special bonus along with the May salaries. This will be in addition to the regular annual bonus and increment.
• MOIL: Manganese ore production up 22% in April to 1.6 lakh tonnes. Manganese ore sales up 17% from last year to 1.15 lakh tonnes.

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