Trade Setup for Feb 16: Nifty needs to cross these two levels to head towards 22,150

In continuation to the prevailing trend, the Indian equity markets closed higher on Thursday, led by gains in Mahindra & Mahindra, Power Grid Corporation, HDFC Bank, the State Bank of India, Bank of Baroda, among others.

The 30-share BSE benchmark Sensex gained 228 points or 0.32% to settle at 72,050. The broader NSE Nifty rose 71 points or 0.32% to end at 21,911. In the broader market, Nifty Midcap100 and Nifty Smallcap100 closed over 1% each. The broader market outperformance kept market breadth in favour of advances.

The PSU stocks have resumed their ongoing rally after a short pause. Oil and gas posted solid gains following impressive quarterly results, improved gross refining margin and strong growth expected in India's oil consumption going forward.

The Mahindra & Mahindra (M&M) stock was the top Nifty gainer, surging 7% following a healthy set of Q3 earnings. M&M's December quarter performance were in-line, driven by a strong growth in the SUV segment. A lot of brokerages continue to be bullish on the stock. CLSA, Nomura, and HSBC have 'Buy' recommendations and target prices of ₹2,074, ₹2,143, and ₹1,900, respectively, on the counter.

Shares of Paytm tumbled another 5% today to hit a fresh record low of ₹325.05 after the stock exchanges BSE and NSE revised the circuit limits lower to 5% from 10% earlier. Additionally, the Enforcement Directorate (ED) quizzed Paytm Payments Bank officials in connection with its investigation into alleged violations of the Foreign Exchange Management Act (FEMA) by entities using the bank.

Foreign investors, meanwhile, were net sellers, selling ₹3,064.15 crore, in the cash market on February 15, while domestic investors were net buyers, buying ₹2,276.93 crore in equities today.

According to Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services, domestic equities are taking support from better-than-expected inflation, which would keep the trend positive. "With the end of Q3 result season, the focus is now shifting to fundamentals and economic macro data," he said.

Nifty is now close to 22,000 as well as its all-time high; Khemka expects it to surpass these levels and touch new highs.

"The benchmark indexes inched higher, mirroring the positive sentiment prevailing in the global market. The disinflation trend in the eurozone, coupled with better earnings, lifted investor sentiment. Despite the broad-based recovery, market participants are more inclined towards quality large-cap stocks owing to the prevailing valuation gap, which led them to exercise caution on small and mid-caps," said Vinod Nair, Head of Research, Geojit Financial Services.

Ajit Mishra of Religare Broking said the rebound in the banking majors combined with rotational buying in other heavyweights is pushing the index higher; however the pace of rise is not over encouraging. "Besides, the recent dip in the US markets has also cautioned the participants. We thus recommend to avoid going overboard and preferring hedged trades."

The Nifty 50 index opened with an upside gap of 66 points and showed volatility soon after the opening. It later shifted into a range bound action with positive bias in the mid part and moved up again towards the mid to later part of the session.

"A small body type candle was formed at the highs with minor upper and long lower shadow. Technically, this pattern indicates a formation of doji type candle pattern. Technically, such formations after a reasonable upmove or down moves signal impending trend reversals. Having formed this pattern after one day of upmove doesn't show any predictive value," said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

Shetti said that Nifty is currently placed at the edge of moving above the minor down trend line resistance around 21900-21950 levels. A decisive break above this hurdle could open the doors for new all time highs around 22150 levels. Immediate support is at 21800.

"Nifty exhibited volatility throughout the day but eventually closed above the resistance level of 21850. According to the daily chart, Nifty has experienced a consolidation breakout, indicating a positive shift in sentiment. Additionally, the index has closed above the 20DMA for the third consecutive session, and the RSI shows a bullish crossover," said Rupak De, Senior Technical Analyst, LKP Securities.

In the short term, the analyst expects a possibility of the index moving towards 22200. "On the downside, support is situated at 21750."

Sheersham Gupta of Rupeezy said that put writing was significantly high in comparison to call writing at the strike prices of 21,900, 22,000, and 22,100 for the monthly expiry. "All these indicate that the market is ready for an up move. However, there is a strong supply zone between 22,000 and 22,100."

The Bank Nifty bulls maintained their strong dominance as the index closed above the 46000 mark for the first time since February 1. PNB, Federal Bank, Bank of Baroda, SBI and HDFC Bank led gains while selling was seen in Axis Bank, AU Small Finance Bank, ICICI Bank and Kotak Bank.

"The Bank Nifty bulls maintained their strong dominance as the index closed above the 46000 mark. The immediate resistance for the index is situated at the 46600-46800 zone, and a successful breach above this level could pave the way for further upside towards the 48000 mark. The lower-end support has shifted to the 45800 mark, serving as a crucial cushion for the bulls in the current scenario," said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.

Nifty 50's February futures shed 3.1% or 3.67 lakh shares in Open Interest on February 15. They are now trading at a premium of 94.30 points, compared to 76.80 points earlier. On the other hand, Nifty Bank's February futures shed 9.5% or 2.97 lakh shares in Open Interest. Nifty 50's Put-Call Ratio remains at 1.19 as against 1.23 earlier.

For next week's weekly options expiry, the Nifty 50 Call strikes between 21,900 and 22,100 have seen Open Interest addition, as did the 22,000 strike.

On the Put side though, the Nifty 50 strikes of 21,700 and 21,900 saw some writing, as did the 21,800 strike for February 22's expiry.

Canara Bank has entered the F&O ban from today's session.

Hindustan Copper, Aditya Birla Fashion and Retail, Bandhan Bank, Zee Entertainment Enterprises, Ashok Leyland, Biocon, Balrampur Chini, Delta Corp, Hindustan Copper, India Cements, Indus Towers, and SAIL continue to remain in the ban.

Aurobindo Pharma, National Aluminium, and PNB is out of the F&O ban list.

Axis Bank issued clarification on the transaction of shares with Max Life Insurance Company after the filing of a public interest writ petition by Subramanian Swamy against Union of India, Axis Bank, Axis Securities Limited, Axis Capital, and others before the High Court of Delhi. The bank said it has obtained all necessary regulatory approvals in connection with these transactions and would take the required steps to defend the bank against any unfounded allegations. The bank believes that there is no material impact from the allegations being made against Axis Bank in connection with the said transactions.

Max Financial Services issued clarification on the petition filed in the Delhi HC alleging that Axis Bank and its group companies have made undue profits from the purchase and sale of the equity shares of the material subsidiary of the company, i.e., Max Life Insurance Company. The company said the transactions were consummated after taking appropriate approvals from the respective regulators, namely the RBI, IRDAI, and CCI, and believes there is no legal or regulatory anomaly in the transactions and due process of law has been followed. The company and Max Life will take all requisite legal recourse to defend the matter before the Court.

UPL: Global rating agency Fitch Ratings has downgraded UPL Corporation's Long-Term Issuer Default Rating to 'BB+', from 'BBB-', citing the weak 9MFY24 EBITDA and lower global crop-protection industry demand due to prolonged destocking and production overcapacity in China. The outlook is negative.

On February 15, Carlyle Group sold equity stake worth ₹1,056 crore in Yes Bank on the BSE. According to market data, Carlyle Group sold 1.35% stake in Yes Bank through open market transactions.

Finsider International Company sold 6.55 crore shares or a 1.76% stake in mining major Vedanta Limited, according to bulk deals data released by BSE. This was part of an 8.2 crore share deal involving other buyers and sellers.

KPI Green Energy subsidiary KPIG Energia has received a new order of 1.5 MW for executing a solar power project under its captive power producer segment.

Entero Healthcare Solutions: The healthcare products distributor, is set to debut on the BSE and NSE on February 16. The final issue price has been fixed at ₹1,258 per share.

US stocks closed higher on Thursday as retail sales data declined more than expected, feeding hopes the Federal Reserve will soon start cutting interest rates in coming months.

A Commerce Department report showed US retail sales dropped 0.8% in January, weighed by declines at auto dealerships and gasoline service stations.

The S&P 500 gained 29.05 points, or 0.58%, to end at 5,029.67 points, while the Nasdaq Composite gained 47.03 points, or 0.30%, to 15,906.17. The Dow Jones Industrial Average rose 350.07 points, or 0.91%, to 38,774.73.