Trade Setup for May 6: Can supportive global cues lend support to the Nifty?

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

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Friday did not turn out to be the kind of session the bulls were anticipating. At one point, the Nifty looked towards reclaiming the 22,800 mark but come the second half of the session, the Nifty barely managed to hold on to 22,350 on the downside, saw a modest recovery from the lows and just about managed to hold on to some weekly gains.

The index did recover 120 points from the lows on Friday but closed below the 22,500 mark. Crossing that level will be the key for the index first up, as it has been a key support in recent times. Despite making a new high during the week, the Nifty almost ended with negative weekly returns.

Another thing to note is the sharp surge in the Volatility index or the VIX, which, after the 20% fall on April 23, has risen 40% in the last seven trading sessions to levels near 15. The VIX rose nearly 9% on Friday as well.

What the bulls can take heart from is the fact that the handover from Wall Street on Friday night has been a positive one. US markets rallied on Friday after a softer-than-expected jobs report in April boosted hopes that the US Federal Reserve will start cutting rates soon. All the three benchmark indices also had a positive weekly close.

On the other side earnings season continues with some big Nifty names reporting results after market hours on Friday and over the weekend. Prominent among them is Kotak Mahindra Bank, which lost another 4% last week after an 11% drop in the week before. The management also spoke about the exit of KVS Manian, saying that he does not have anything in hand as of now to the best of their knowledge.

Other stocks that reported results over the weekend include Titan, Britannia, Avenue Supermarts, and Inox Wind. Some important names that will report results on Monday include Godrej Consumer, Marico, Gujarat Gas, CG Power, Happiest Minds, Lupin and others.

Foreign institutions were heavy sellers during Friday’s trading session in the cash market, while domestic institutions were net buyers.

Ruchit Jain of 5paisa.com believes that although the short-term trend remains positive, one should remain very stock specfic and cautious till the Nifty crosses the 22,800 mark on the upside. On the downside 22,300 remains an important support for the Nifty, which if broken, can lead to downward moves towards 22,000 or even 21,900.

Nifty’s short-term trend seems to have reversed downwards, is the view of HDFC Securities’ Nagaraj Shetti. He expecta short-term downward correction in the coming sessions after the higher top of the bullish pattern was completed at levels of 22,794. Immediate resistance on the upside is 22,600, while support is at 22,120.

For the time being, we would remain neutral and the Nifty Bank will be key to strengthen the Nifty momentum in the upcoming week, said Osho Krishnan of Angel One. 22,350 – 22,300 will be a key support for the Nifty, followed by the 50-Day Exponential Moving Average of 22,230 and 22,200. On the upside, 22,750 – 22,800 remains a challenge for the bulls.

Speaking of the Nifty Bank, the index also fell in line with the Nifty on Friday but that is also because of specific constituents being plagued with issues of their own. The reaction to Kotak Mahindra Bank on Monday will be key to which way the index moves.

The index is already down 1,000 points from its record high of 49,975 and while it was set for levels of 50,000, it now closed below 49,000 last Friday, but still managed to end 1.5% higher for the week.

For the short term, 48,500 and 48,300 will be key levels for the Nifty Bank on the downside and a sustained move below 48,342 wil trigger further weakness, said Hrishikesh Yedve of Asit C Mehta Investment Intermediates. On the upside, 49,500 and 50,000 will continue to act as barriers.

Om Mehra of SAMCO Securities said that the hourly chart of the Nifty Bank reveals a weakening trend with a lower highs, lower lows formation. Immediate support is seen at 48,340, which is near the 20-DMA, while resistance on the upside is at 49,400.

Immediate resistance for the Nifty Bank is at 49,200, above which the index can head back to 49,500, said LKP Securities’ Kunal Shah. However, a break of downside supports between 48,800 and 48,700, may drag the index further down towards its 20-Day Moving Average of 48,340.

What Are The F&O Cues Indicating?

Nifty 50’s May futures shed 5.4% or 5.96 lakh shares in Open Interest on Friday. They are now trading at a premium of 99.35 points from 125.75 points earlier. On the other hand, Nifty Bank’s May futures shed 8.7% or 1.9 lakh shares in Open Interest on Friday. Nifty 50’s Put-Call Ratio is now at 0.89 from 1.27 earlier.

Balrampur Chini and GMR Airports are in the F&O ban today along with Aditya Birla Fashion, Biocon and Vodafone Idea.

Nifty 50 on the Call side for May 9 expiry:

On the Call side, the Nifty 50 strikes between 22,500 and 22,800 have seen Open Interest addition for this Thursday’s weekly expiry.

Nifty 50 on the Put side for May 9 expiry:

On the Put side, while 22,000 to 22,000 strikes have seen Open Interest addition for this Thursday’s expiry, the 22,700 strike has seen Open Interest shedding.

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

These stocks added fresh short positions on Friday, meaning a decrease in both price and Open Interest:

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

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

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

• Kotak Mahindra Bank: Net Interest Income of ₹6,909 crore, higher than poll estimate of ₹6,670.2 crore. Net profit of ₹4,133.3 crore also higher than the CNBC-TV18 poll of ₹3,376.9 crore. AIF provisions worth ₹157 crore released during the quarter. Write-offs of ₹1,455 crore in retail, unsecured book aids Gross NPA. Favourable tax credit of ₹200 crore during the quarter. Gross NPA at 1.39% from 1.73% in December, while Net NPA remains flat at 0.34%. Net Interest Margin expands sequentially compared to expectations of a fall.
• Britannia: Net profit of ₹536.6 crore, compared to a CNBC-TV18 poll of ₹541 crore. Revenue of ₹4,069.4 crore in-line with expectations. EBITDA also meets expectations at ₹785.5 crore, while EBITDA margin at 19.4%, fell 50 basis points year-on-year but was 20 basis points higher than estimates.
• Titan: Net profit of ₹786 crore, below the CNBC-TV18 poll of ₹830 crore. Revenue of ₹11,257 crore, meets estimates of ₹11,300 crore. EBITDA of ₹1,109 crore, below estimates of ₹1,250 crore. EBITDA margin also misses expectations of 11.1%, coming in at 9.9% for the quarter. Jewellery business margin at 12.3%, watches business margin at 10.2%, eyewear margin at 11.7%. While jewellery and watches margin meets estimates, eyewear margins surpassed expectations. Also announces dividend of ₹11 per share.
• Avenue Supermarts: Net profit up 22.5% to ₹563.3 crore. Revenue up 20.1% to ₹12,726.6 crore. EBITDA up 22.3% to ₹944 crore, while EBITDA margin expands by 10 basis points to 7.4% from 7.3%.
• M&M Financial Services: Net Interest Income up 15.5% to ₹1,918.9 crore. Net profit down 9.5% to ₹619 crore. Provisions at ₹341.5 crore from ₹328.4 crore last quarter. Gross NPA at 3.4% from 3.97% in December. Gross NPA of housing subsidiary at 9% from 11.55% in December. Net recoverable balance post fraud at ₹135.9 crore. Provisions have been made in this regard.
• Zen Technologies: Won orders worth ₹1,358 crore during the financial year. Order book as of March 31, 2024 at over ₹1,400 crore. Poised to sustain growth in FY25, aiming to surpass ₹900 crore in sales. Aim to launch a range of innovative products in the coming days and months for both Indian armed forces and international clients.
• Tata Technologies: Constant currency revenue growth of 0.3% sequentially. Services revenue down 1% sequentially. Anticipated ramp down within VinFast led to drop in services revenue. Ex-Vinfast, Services revenue grew by 10.4% sequentially and 31.7% year-on-year. Expect to see further run-off in VinFast in Q1. Net profit down 27.4% due to higher taxes and lower other income.
• Kansai Nerolac Paints: Good performance from the decorative segment. Revenue up 2.1% to ₹1,769 crore. EBITDA margin expands by 40 basis points to 10.1%. Decorative paints saw double-digit volume growth. Industrial coatings moderated over the previous quarter. Forecast of a good monsoon should augur well for the paint industry. Total resins capacity at two plants to increase from 907 MT per month to 1,757 MT per month.
• CDSL: Total income up 86% from last year to ₹267 crore. Net profit up 63% year-on-year to ₹129 crorre. Board recommended final dividend of ₹19 per share and a special dividend of ₹3 per share. 11.56 crore demat accounts in March 2024.
• IDBI Bank: Net Interest Income up 12.4% to ₹3,687.9 crore, net profit up 43.7% from last year to ₹1,628.5 crore. Provisions down 88.4% from last year to ₹113.8 crore. Gross NPA at 4.53% from 4.69%, while Net NPA at 0.34%. Slippages triple to ₹1,852 crore from ₹614 crore last year, while write-offs rise to ₹433 crore from ₹316 crore last year.
• MRPL: Net profit down 40.5% to ₹1,138.5 crore. Revenue flat at ₹25,328.7 crore. EBITDA down 33.3% at ₹2,329.7 crore. EBITDA margin down 460 basis points to 9.2%. GR at $11.35 per barrel from $15.12 per barrel.
• Aurobindo Pharma: USFDA issues seven observations for Unit-II of the formulations manufacturing facility in Bhiwadi in Rajasthan. The facility was inspected between April 25 – May 3, 2024. The company said that the observations are procedural in nature.
• Adani Ports: Group expresses interest to acquire and develop Bataan Port in the Philippines.
• Ujjivan Small Finance Bank: Sanjeev Nautiyal appointed as MD & CEO for a period of three years starting July 1. He was earlier Deputy MD Financial Inclusion and Micro Markets of SBI and MD & CEO of SBI Life Insurance.
• Zydus Lifesciences: US arm Sentynl Therapeutics acquires worldwide proprietary rights to Zokinvy at a net base price of $45 million from US-based Eiger Biopharmaeuticals. Zokinvy is approved for the treatment of a collection of ultra-rare, fatal, genetic premature ageing diseases.

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