Dips should be bought into, and good quality midcaps should be accumulated from the current levels; however, the upside target for Nifty is seen at 12,430 levels.
The Nifty50 and Bank Nifty ended at all-time closing highs. A huge short covering was seen in the derivative markets post-Exit poll results announced on 19th May.
The gap-up opening on 20th May left the unfilled gap up of 165 points between 11,426 and 11,591 in Nifty. This range has become strong support in the Nifty for the coming days.
After a correction of 748 points from the highs of 11,856 (18th April 2019 High) to 11,108 (14th May 2019 Low), the Nifty has recouped all the losses in the span of last three sessions.
Till last week, Nifty Midcap and Smallcap indices were falling for the past 5-7 weeks respectively. There were many stocks, which turned extremely oversold on the short to medium term charts.
The Nifty50 ended the week on a strong wicket and signalled a bullish reversal by the end of the week. Large caps have been outperformers and still look strong on the charts.
But, we see an opportunity for taking longs in Midcap and Smallcap segment from current levels. The risk-to-reward ratio looks highly favourable in that segment after huge carnage was seen in the last one and a half years.
The Nifty Midcap and Smallcap indices are still down 20 percent and 33 percent from their respective all-time highs levels registered in January 2018.
Though the Exit polls indicate a clear majority for the NDA government, actual results are yet to come out, which will be announced on May 23. So, there could be some consolidation in benchmark indices in the next two sessions.
The bigger picture on the charts indicates that Nifty has formed a bullish “Cup and Handle” pattern on the weekly charts, indicating a continuation of the primary bullish trend.
We believe that the range starting from 11,426 to 11,591 would remain as a strong support zone for Nifty50. The Midcaps and Smallcaps seem to have bottomed out and are all set to narrow down the performance gap with largecaps.
Dips should be bought into, and good quality midcaps should be accumulated from the current levels; however, the upside target for Nifty is seen at 12,430 levels.
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