Nifty PSU Bank index near make-or-break zone. Mehul Kothari tells you what to do

Hovering near all-time high resistance of 5375, Nifty PSU Bank index is now near the make-or-break zone. “If at all there is a breakout on a closing basis from this high then we expect a fresh round of rally in the index and PSU stocks. However, failing to do so in the coming weeks might force some kind of profit booking or consolidation in PSU Bank stocks,” says Mehul Kothari, AVP - Technical Research, Anand Rathi Shares and Stock Brokers. Edited excerpts from a chat:

Nifty ended the month 1.5% stronger despite all the negative news surrounding rising crude, bond yields and dollar index. Given the fact that FIIs are having $733 million short position in index futures, where do you see the index going in October which is known as 'Bear Killer'?
Although the final session of the historic series of Sept 2023 ended on a disappointing note, the final trading session of the month brought some hopes for the bulls. During the month, index Nifty made a life high of 20222 in the first half of the month whereas on the other hand closed the month near 19600 mark.

With regards to FII data, their long short ratio in index futures is near 30% and still it is not in the oversold zone. Thus, this data can affect the sentiments going ahead. However, technically on the daily chart of Nifty spot we are witnessing a trend line breakdown and the continuation of the same or impact of the same could be seen below the 19500 mark. Thus, for the coming week, 19500 on a closing basis might remain an important support for the bulls. On the other hand, we are also witnessing a bullish Harami pattern on the daily scale and hence a move above the recent high of 19766 would negate the recent bearish evidence. Thus, a move above 19766 in the coming sessions might reinforce the bulls to bring the index back towards the 20000 mark.

It looks like till HDFC Bank starts inching upwards, it would be nearly impossible for Nifty Bank to sustain positive momentum. Would you be comfortable shorting the stock as well as the banking index in the October series?
For Nifty Bank index, we have some important observations to share. The index has never closed in red during the month of October for the last 10 years. Hence, there is a high possibility that the index might outperform the benchmark indices during the month. On the levels front, 44000 – 43600 seems to be a very strong base for the short term and on the upside a move above 45000 might bring the momentum back in the index. Traders are advised to watch out for this space in the coming weeks.

HDFC Bank is still hovering near the crucial support of 1510 and if that is breached then we expect the stock to settle near 1460 odd levels. This could be the zone from which we might start observing some demand in the stock.

Tata Investment Corporation has surprised with a 34% rally in the last one month amid news related to IPO plans of Tata Capital. What are the charts looking like for the week ahead?
The stock is in a strong up trend but recently it has rallied a lot in the short term. We expect some consolidation in the stock and an ideal range to enter longs could be near 3000 levels. Overall, with a time frame of 3 – 6 months, the stock has potential to reach towards 3600 – 3800 levels.

Nifty PSU Bank was the top sectoral performer in the week. Do you see signs of an impending profit-booking amid overbought levels? Which are the PSU bank stocks one should stay away from at the current level?
At this point in time, the Nifty PSU Bank is hovering near the all-time high resistance of 5375. If at all there is a breakout on a closing basis from this high then we expect a fresh round of rally in the index and PSU stocks. However, failing to do so in the coming weeks might force some kind of profit booking or consolidation in PSU Bank stocks. Thus, the index is near the make-or-break zone


Give us your top stock picks for the week ahead.
GM BREWERIES

BUY NEAR 725| TARGET: 780| STOP LOSS: 695

After a major consolidation, the stock has confirmed a strong breakout above 720 levels and the price is supported by heavy volumes.


PANACEA BIOTECH
BUY NEAR 163| TARGET: 183 | STOP LOSS: 153

The stock has confirmed a breakout that resembles a bullish FLAG pattern on the daily chart. The theoretical target for the pattern comes around 200.