Nifty: Large caps likely to outperform broader market: Analysts

Nifty: Large caps likely to outperform broader market: Analysts

The Indian market is poised to maintain its positive momentum, with large-cap stocks expected to outperform the broader market. This trend is indicated by the Nifty vs Nifty 500 ratio reaching its lowest point. Analysts anticipate Nifty to climb towards 22,800, provided it remains above 22,300. Some of the recommended stocks include Reliance Industries, Axis Bank, ICICI Bank, SBI, Infosys, Hindalco, Jindal Steel, BEL, Tata Steel, M&M, and BHEL.


Where is Nifty headed?
Nifty managed to hold 21,800 and recorded a fresh all-time high of 22,463. The index has retraced the past five sessions’ decline in just a single session, highlighting faster retracement that makes us expect it to head towards 22,700. In the process, we expect large-caps to relatively outperform the broader market as the ratio of Nifty vs Nifty 500 has bottomed out around 1 level. Empirically, in a general election year, Nifty had bottomed out in Feb March, followed by a decent rally towards the poll outcome in each of seven instances over the past three decades. Expect Nifty to maintain the trend and head towards 23,400 by June.

What should investors do?
Bouts of volatility ahead of the election should be capitalised as buying opportunity. Sectorally, BFSI is expected to lead the rally well supported by auto, capital goods, IT, and metal. On the stock front, in large-cap, we prefer RIL, Axis Bank, SBI, Infosys, Hindalco, HAL, Ambuja Cements, and M&M; while in midcaps, Jindal Steel and Power, Delhivery, Coforge, BEL, Vguard, Castrol India, GPPL are looking good.


Where is Nifty headed?
On weekly chart, Nifty has formed a small bullish candle with a lower shadow, indicating buying near the 20-daily SMA. If Nifty sustains above the 22,300 level, we can expect buying to lead it towards 22,600-22,800 levels. However, if the index breaks below the 22,100 level, it would witness selling, taking the index towards 22,000- 21,850. We expect metal, automobile, real estate, capital goods, defence, and oil & gas to perform well. What should investors do?
For investors, we suggest Tata Steel, SAIL, M&M, TVS Motors, Tata Motors, DLF, Godrej Properties, Siemens, BHEL, HAL, ONGC, BPCL, and RIL. Traders can initiate a moderately bullish Bull Call Spread strategy for March 7 expiry. Buy one lot of 22,400 calls at Rs 145 and sell one lot of 22,650 calls at Rs 47, with maximum possible loss of up to Rs 4,900. If Nifty closes above 22,498 on expiry, the strategy will start making a profit. The maximum gain will, however, be restricted at Rs 7,600 only, because of the sold 22,650 strike call.


Where is Nifty headed?
Nifty has recently experienced a bullish continuation sign as it has broken out from a 10-day consolidation period of 21,800 to 22,200. At present, the index is moving towards its immediate resistance level of 22,500. A ratio chart of Nifty large cap to small cap indicates that Nifty 200 stocks may soon attract significant attention. Meanwhile, the Bank Nifty to Nifty 50 ratio chart suggests that the bank index may emerge from its underperforming phase, with several technical factors indicating its potential for growth. These include the double bottom formation, 100 EMA support, lower band of rising channel, and bullish conformation.

What should investors do?
It is predicted that Bank Nifty may soon reach its all-time high of around 48,500 level, with private Bank Nifty already having given a breakout from the inverted head & shoulder pattern. Investors can consider stocks such as ICICI Bank, Axis Bank, AB Capital, and Max Financial Services.

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