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Technical and derivatives analysts said the Nifty could rise to 16,800 if it sustains above 16,400-16,500 levels. However, if it fails to cross that level, it remains prone to another sell-off. After surging 2.89% to 16,266.15 on Friday, the index ended the week with a gain of 3.1% and outperformed most Asia peers.


Where is the Nifty headed?
Nifty closed positive after six weeks on weekly charts creating hope that markets may have bottomed and we could see a bounce back. However, failure to cross 16,500 will keep the odds open for another sell-off in the coming weeks. It is too early to bet on a sustainable rally in the market. The risk to the downside is still substantial as interest rates remain on an upward trajectory.

What should investors do?
In a falling market the strategy shifts from buy-on-dips to sell-on-rallies. The market is witnessing a broad-based decline and there has been almost no place to hide except the FMCG sector where stocks like and have been leading the gains. So investors could narrow their focus on MNC FMCG stocks that are holding out. But for everything else, we will have to wait for lower levels before there is any significant improvement


Where is the Nifty headed?
As long as the index sustains above 15,900-15,950 support zone, the reversal could continue up to 16,410, above which we could witness further short covering till 16,590. However, if Nifty slips below 15,900, weakness could persist up to 15,670. Options data suggest a trading range of 15,900-16,600 for the week.

What should investors do?
Investors should look to buy the dips till 15,900 is not breached on the downside on Nifty and should accumulate quality stocks; while traders should focus on stocks and sectors that are relatively outperforming Nifty as of now. Given the roller-coaster ride of the past few sessions, traders should focus on managing overnight risks by preferring hedged bets and appropriate position sizing. While positive momentum may be witnessed in banking, PSU, FMCG as well as pharma stocks, attractive risk-reward could be witnessed in stocks from auto, cement and infrastructure sectors. It will be better to stick to large-caps at the current juncture taking into account the heightened volatility in the market. Our preferred large-cap picks are

, L&T, and . We are suggesting a limited-risk strategy where index traders can initiate a Bull Call spread which involves buying 16,250 Call and Selling 16,450 Call with a premium cost of 80-85 points and a potential profit of 120 points. Traders can keep a stop loss of 40 points of the premium.


Where is the Nifty headed?
On weekly chart, Nifty has formed a bullish candle and remained restricted within previous week’s high-low range indicating a lack of strength on either side. The index managed to hold the March 2022 swing low and formed higher high, and has taken the support around 15,700 levels and shown pullback action multiple times in recent past, indicating 15,700 is likely to act as important and major support on downside. If Nifty crosses and sustains above 16,400 levels, it would witness buying which would lead the index towards 16,600-16,800 levels. However, if it breaks below 16,000 levels, it would witness selling towards 15,700-15,850.

What should investors do?
We expect automobile, FMCG, pharma, oil and gas and cement sectors to show bullishness in near term. For the monthly expiry on 26th May, we are suggesting Bullish Call Ladder strategy, which involves buying one lot of Nifty 16,300 Calls at Rs 152 and selling of one lot each of 16,500 Calls at Rs 71 and one lot of 16,700 Calls at Rs 27 as both the strikes have high open interests and may act as resistance for the expiry. The cost of the strategy involves outflow of Rs 2,700 which is the maximum loss if Nifty trades and remains below 16,350 levels on expiry. The maximum profit of Rs 7,300 will be attained above 16,500 levels — an important resistance zone. While the strategy will start making loss if Nifty crosses 16,850.


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