Trade Setup for July 8: Will buying on dips continue in Nifty?

Two stocks and one theme dominated the Nifty for the entire past week. These two stocks were Reliance Industries and HDFC Bank, while the IT theme continued to dominate the headlines. If one took the market higher, the other ensured that the gains were kept in check and vice versa. IT supported the market in three out of five trading sessions last week.

On Friday, it looked like Nifty would finally break its rising streak due to some profit booking at higher levels on the back of a fall in HDFC Bank and inactivity in the IT sector, but towards the end of trade, the index recovered sharply on the back of a sharp surge in Reliance Industries and closed in the green.

HDFC Bank was the only bank that pulled the Nifty lower after a weak quarterly business update, Reliance, L&T, SBI and HUL contributed to the recovery. Nifty closed with a gain of 1.3% during the week.

Wall Street resumed trading after the holiday on Friday and the S&P 500 and Nasdaq recorded another record close. The jobs report released on Friday indicated a rise of 2,06,000 in non-farm payrolls in June, while the unemployment rate rose to 4.1%, slightly higher than the estimate of 4%. The jobs report also pointed to rising expectations of interest rate cuts by the US Federal Reserve soon.

Many stocks will react to their quarterly business updates reported on Friday and over the weekend such as Titan, IndusInd Bank, Marico, Dabur and others. Earnings season is also starting in the upcoming week, with TCS results on July 11, followed by HCLTech on July 12.

Foreign entities remained net buyers in the cash market in Friday's session, while domestic entities booked profits at higher levels.

Amol Athavale of Kotak Securities wrote that for traders, 24,100 will become a crucial support zone for Nifty, followed by 24,000, while on the upside, 24,400 – 24,500 will act as a barrier for the index. Below 24,000, traders will exit their long positions, he added.

Nagaraj Shetti of HDFC Securities said Nifty has formed a bullish candle with minor upper and lower shadows on the daily chart. Technically, this market action indicates the formation of a bullish counter-attack type candle pattern and a similar formation on June 24 had resulted in a sustained rally in the coming weeks. He expects an upside breakout of 24,400 – 24,500 levels in the coming sessions, with 24,170 being the downside support.

Osho Krishnan of Angel One said 24,200 is likely to provide support for short-term volatility, followed by 24,000. He expects 24,400 – 24,500 to be the resistance and Nifty will remain strong for the next few sessions.

On a day when HDFC Bank declined over 4%, it is very unlikely to expect a recovery for Nifty Bank, even if other banking stocks tried their best to raise their hand. If HDFC Bank led the gains in the early part of the week, it also gave up gains on Thursday and Friday. Nevertheless, Nifty Bank managed to recover nearly 400 points from the day's low to post a weekly gain of 0.6%.

Om Mehra of Samco Securities believes that if Nifty Bank slips below 51,990 on the downside, it could be pushed towards 51,700 level, where strong support exists. He expects the index to consolidate in the coming days and resume the uptrend only after moving above 53,100.

Kunal Shah of LKP Securities said Nifty Bank is currently stuck in a range with resistance between 53,000 – 53,200, where aggressive call writing has been seen. Support on the downside is between 52,300 – 52,100. He expects breakouts from either side to result in trending moves. Within the range, the trend remains bullish and he recommends using dips as buying opportunities.

What are the F&O signals indicating?

New long positions were added in these stocks on Friday, meaning both price and open interest increased:

store price change OI Changes
United Breweries 1.46% 19.51%
Divi's Laboratories 1.90% 17.40%
ONGC 4.30% 12.53%
Bajaj Auto 1.67% 7.37%
Laurus Labs 5.01% 6.81%

These stocks saw fresh short positions on Friday, meaning an increase in open interest but a drop in price:

store price change OI Changes
GNFC -2.00% 12.62%
HDFC bank -4.51% 9.43%
Indusind Bank -0.59% 5.99%
ICICI Bank -0.14% 5.81%
Titan -1.93% 4.26%

These names witnessed short covering on Friday, which means a drop in open interest but a rise in price:

store price change OI Changes
TVS Motor 2.24% -9.26%
Gujarat Gas 3.03% -7.49%
Ambuja Cement 0.37% -7.18%
Mphasis 1.11% -6.05%
Hindustan Copper 1.10% -5.86%

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

  • Indusind Bank: Advances have increased by 16% over the last year to Rs 3.48 lakh crore. Deposits have increased by 15% over the last year to Rs 3.98 lakh crore. CASA ratio has increased from 39.9% last year to 36.7% and 37.9% in March.
  • Titan: Jewellery domestic operations grew by about 8%. Overall, it grew by 9% year-on-year. Higher gold prices and fewer wedding days impacted consumer demand and overall sentiments remained relatively muted. Watches and wearables business grew by 15% over last year, while eyecare business saw a growth of 3% year-on-year.
  • Marico: Consolidated revenue grew in high-single digits and is expected to remain upward in the remainder of the year as well. Gross margins are also expected to expand on a y-o-y basis due to favourable portfolio mix. Domestic business recorded a marginal increase in underlying volume growth on a sequential basis. Parachute Coconut Oil recorded low single-digit volume growth but is likely to grow markedly in the remainder of the year given the healthy offtake growth trend. Saffola Oils recorded mid-single digit volume growth. Value-added Hair Oils performed softly in the beginning of the year due to competitive headwinds.
  • Dabur: Demand trends witnessed a sequential improvement with rural growth picking up. The improvement is expected to accelerate in the coming months. Consolidated revenue is expected to grow in mid-to-high single digits, while the India business may witness mid-single digit volume growth. The HPC and Healthcare segments are expected to grow in high-single digits. The International business is expected to register strong growth in constant currency terms. Gross margins may see some expansion.
  • Bank of Baroda: Domestic advances grew 8.5% from last year to ₹8.82 lakh crore. Domestic retail advances grew 20.8% to ₹2.22 lakh crore. Global advances grew 8.1% to ₹10.72 lakh crore. Domestic deposits grew 5.25% to ₹11.05 lakh crore.
  • Adani Wilmar: Strong volume growth of 13% was driven by market-specific strategies across each category aimed at gaining market share, especially in under-listed markets. Alternate channels witnessed volume growth of 19%. Branded export volumes grew 36% year-on-year. Food and FMCG business volumes grew 23% over last year. Edible oil business continued to grow despite challenges across industries. Edible oil business witnessed volume growth of 13% year-on-year and value growth of 10%.
  • Indian Bank: Total turnover grew 10.9% year-on-year to Rs 12.21 lakh crore. Total deposits grew 9.5% from last year to Rs 6.81 lakh crore. Gross advances grew 12.7% to Rs 5.4 lakh crore.
  • Signature Global: Pre-sales grew 255% to ₹3,120 crore. Collections grew 102% to ₹1,210 crore compared to last year. Net loans decreased by ₹180 crore to ₹980 crore. Receivables for the quarter increased to ₹15,369 per sq ft. Number of units sold grew 8% to 968 units from 894 units. 30% of ₹10,000 crore pre-sales guidance was crossed in the first quarter itself.
  • Apollo Hospitals: Acquisition of 35.12 lakh shares of ₹10 each of Apollo Health and Lifestyle Limited, a subsidiary, at a price of ₹294 per share, through rights issue for ₹103.26 crore.
  • Bandhan Bank: Ratan Kumar Kesh appointed as interim MD and CEO for three months from July 10, 2024.

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