Trade Setup for April 18: Midcaps, Smallcaps offer some hope as Nifty grinds lower

Having declined 600 points in three sessions, the Nifty is down to levels last seen on March 27. It is also the first time in three months that the index fell for three days in a row. The heavyweights have refused to lend support to the index even after falling below key support levels.

IT, from a potential support, has again become a major pain-point for the market. With no post-earnings support from TCS, more top-level exits at LTIMindtree and Wipro, have added to the pressure on the Nifty. All eyes are now on Infosys when it reports results on Thursday evening and the street will be keenly watching out for the management’s guidance for financial year 2025.

However, while the index continues to grind lower, the broader markets are offering some hope. The Midcap index ended flat on Tuesday, while Smallcap index ended with gains of over 0.5%. Sectors like Defence, Pharma, FMCG managed to hold up in a weak market on Tuesday. That may also give the bulls some heart.

One must also take note of the NSE circular on Tuesday, which imposed an additional exposure margin of 15% in the equity derivatives segment on securities in which the top 10 clients account for more than 20% of the Market-wide Position Limit. This framework will be effective from April 26, after the expiry of the April contracts.

Global markets have been relatively subdued on Tuesday night, while Asian markets on Wednesday morning were mixed. While Japanese equities fell, the Chinese markets did well. Thursday will also be the weekly options expiry of the Nifty contracts.

Foreign investors continued to remain heavy sellers in the cash market on Tuesday, while domestic investors yet again tried offsetting the losses in the cash market by being net buyers.

Ruchit Jain of 5paisa.com advises a stock specific approach to be a better trading strategy for a near term. The weekly options data hits at a 22,000 – 21,950 range for the Nifty, which also coincides with a rising trendline is support. A breach of that support can take the index lower to 21,750 levels. He does expect a pullback towards 22,400 as readings are oversold and market breadth is positive.

The Nifty is currently placed near the crucial support of ascending trend line as per the weekly chart and the lower end of an ascending channel on the daily chart of around 22,000. Even as the short-term trend remains weak, he expects an upside bounce from 22,000 levels. Immediate resistance on the upside is 22,260.

Asit C Mehta Investment Intermediates wrote in a note that the Nifty’s channel pattern has a lower end support at around 22,000 levels, which is a significant support, which, if maintained, can lead to a rebound rally towards 22,500. Short-term support for the Nifty is between 22,000 – 21,900, while upside barriers are at 22,300 and 22,500.

Along with IT, banking stocks have not managed to lend any support to the Nifty either. The Nifty Bank has also shed over 1,500 points in the last three trading sessions. The index closed below the 47,500 mark on Tuesday, which is the first time in the entire April series. HDFC Bank stood out in a weak market, but could not counter the selling pressure seen in stocks like ICICI Bank and IndusInd Bank.

The Nifty Bank needs to sustain around the 47,500 – 47,400 range to ensure a pull back towards the 48,000 levels, said Kunal Shah of LKP Securities. However, a break below levels of 47,300 may trigger further selling pressure on the index and can even drag it towards levels of 46,500.

What Are The F&O Cues Indicating?

Long positions were seen in these stocks on Tuesday, meaning an increase in both price and Open Interest:

These stocks added fresh short positions on Tuesday, meaning a decrease in price but increase in Open Interest:

These are the stocks to watch out for ahead of Thursday’s trading session:

• Vodafone Idea: ₹18,000 crore FPO opens for subscription. GQG, Fidelity Funds, UBS among those who invested in the anchor book. The company raised nearly ₹6,000 crore through anchor investors.
• Infosys: Partners with Belgium’s Proximus for customer service management operations. To report March quarter earnings after market hours on Thursday.
• Zee Entertainment: To withdraw merger implementation application from the NCLT against Sony. To aggressively pursue all its claims against Sony in the ongoing arbitration proceedings at the Singapore International Arbitration Center. Additionally, the stock will also be excluded from the F&O segment from June 28, 2024.
• Angel One: Revenue up 64.3% for the March quarter to ₹1,357.2 crore, while net profit up 27.3% from last year to ₹340 crore. EBITDA margin narrows to 39% from 46.7% but EBITDA up 37.2% to ₹529.7 crore from ₹386 crore.
• Shilpa Medicare: Unit 4 in Jadcherla, Telangana was inspected by the Austrian regulators and issued a GMP certification. The previous inspection at this unit took place in January 2020. The unit is engaged in the manufacturing, testing and distribution of sterile injections and non-sterile tablets and capsule finished dosage forms in the US, Europe and rest of world markets.
• Ambuja Cements: Adani Group completes warrant subscription, raises stake to 70.3% from 63.2% and infuses an additional ₹8,339 crore in the company, taking the total fund infusion to ₹20,000 crore. Ambuja intends to double its capacity to 140 MTPA by 2028.
• Paytm: Says not received any communication suggesting a deferral or penalties for Paytm Payment Services’ license application.
• Brigade Enterprises: Reported pre-sales of ₹6,013 crore in financial year 2024, the highest in a quarter and a financial year. For the quarter, pre-sales stood at ₹2,243 crore. Average realisations increased 23% over financial year 2023. Average room rate (ARR) for hospitality portfolio stood at ₹6,480, up 8% in the year. The company remains optimistic of strong residential demand in financial year 2025.
• Sunteck Realty: Pre-sales in the March quarter up 26% year-on-year to ₹678 crore. Pre-sales for the full financial year up 20% from last year to ₹1,915 crore. Collections down 10.3% for the quarter to ₹296 crore and down 1% for the full year to ₹1,236 crore.
• Jubilant Pharmova: USFDA determines inspection of Roorkee facility at Voluntary Action Indicated and that the solid dosage manufacturing facility is in compliance with current Good Manufacturing Practices. The USFDA has also classified the inspection as closed.
• Power Grid: Board approves raising up to ₹12,000 crore via bonds in financial year 2025.
• KIMS: Subsidiary gets income tax demand worth ₹307 crore.