BofA Global Research has maintained its year-end Nifty target of 26,200, implying a 9% upside from current levels, as it expects earnings growth to improve and believes the risk-reward for Indian equities has become more balanced. According to Amish Shah, Head of India Research at BofA Global Research, Nifty earnings growth is expected to accelerate to 10%, up from 5-7% seen over the financial years 2024-25 (FY25) and 2025-26 (FY26), although still below the broader market consensus of 13%. The brokerage has become more constructive on the market after remaining cautious for nearly two years, even though it continues to factor in moderate foreign institutional investor (FII) outflows. Shah expects small and mid-cap companies to regain their earnings growth premium over large caps between 2025-26 and 2027-28 (FY28).
The Nifty 50 index opened with a gap-up of around 160 points and witnessed sustained buying throughout the session as bulls defended its crucial support zones. According to Chandan Taparia, head of derivatives & technicals at Motilal Oswal Financial Services, the index formed a Doji-type candle on the daily frame and is forming higher highs and higher lows over the last two trading sessions. The broader trend remains choppy, with Nifty trading below its 20-day and 100-day EMAs and placed above 50 DEMA. For bullish momentum to strengthen further, Nifty needs a decisive close above 24,050, while support can be seen at 23,900-23,890 zones. On the option front, Maximum Call OI is at 24,000 strike (69.27 lakh contracts), followed by 24,500 strike (50.69 lakh contracts) and 24,200 strike (41.54 lakh contracts). Maximum Put OI is at 24,000 strike (59.11 lakh contracts), then 23,500 strike (41.46 lakh contracts) and 23,700 strike (34.3 lakh contracts). The Nifty 50 witnessed directionless movement during the monthly F&O expiry session before ending 0.04 percent lower on July 28. If Nifty convincingly moves above 24,050, the 24,200-24,300 zone will be the immediate area to watch, followed by 24,400 (the 200-day EMA) as the next key hurdle, according to experts.
The Bank Nifty index opened on a negative note near 56,850 levels but showed some recovery towards 57,000 zones in the first half of the session. However, it failed to hold 57,000 levels and gradually drifted lower towards 56,700 levels in the latter part of the session. According to the technical analysis, the index formed a small bearish candle on the daily scale as selling pressure was seen at higher zones but is holding above its 200-DEMA. For a bounce towards 57,000, then 57,250 levels, Bank Nifty needs to cross and hold above the 56,750 zone, while a hold below could see weakness towards 56,250, then 56,000 zones. On the put side, the 57,000 strike holds the maximum Put open interest (6.04 lakh contracts), followed by 56,000 strike (4.84 lakh contracts) and 56,500 strike (3.4 lakh contracts). The 57,000 strike holds the maximum Put writing (1.19 lakh contracts), followed by the 56,000 strike (70,770 contracts) and 57,500 strike (66,540 contracts). The 57,200 strike saw maximum Put unwinding (14,370 contracts), followed by the 56,300 and 57,300 strikes, which shed 7,830 and 2,850 contracts, respectively.
The Nifty 50 witnessed directionless movement during the monthly F&O expiry session before ending 0.04 percent lower on July 28. The fear index, India VIX, extended its downtrend for another session, declining 0.77 percent to 12.56 and remaining below all key moving averages, which continues to favour bulls. However, the index needs to fall below the 12 mark for bulls to gain stronger confidence and for downside risk to reduce further. The Nifty Put-Call ratio (PCR) fell to 1.05 on July 28, from 1.11 compared to the previous session, indicating traders are selling more Put options than Call options, which generally indicates the firming up of a bullish sentiment in the market. The Nifty witnessed long unwinding in 106 stocks during the session, while 97 stocks saw short-covering, meaning a decrease in open interest along with price increase. A long build-up was seen in 4 stocks, indicating increased long positions.
BofA Global Research prefers a mix of value and growth themes across sectors. Among value sectors, Shah highlighted financials, regulated power and gas utilities, upstream energy, power financiers, and regulated power developers. On the growth side, he favours autos, jewellery, internet companies, aluminium producers, consumer discretionary names, travel and tourism, and selected small and mid-cap stocks. The brokerage has upgraded the IT sector from underweight to neutral after the recent correction linked to concerns over artificial intelligence (AI). While he expects a tactical rebound, he remains cautious on the sector over the longer term due to AI-related disruption risks. Within the sector, he prefers mid-cap IT over large-cap IT because of stronger growth prospects. BofA expects AI-related capital expenditure to continue despite ongoing debate over returns, but the brokerage expects 75 basis points (bps) of US Federal Reserve rate hikes, which could weigh on AI-linked stocks in the near term. The brokerage is less constructive on some areas that have outperformed in recent years, expecting defence and real estate stocks to move sideways, while renewable energy developers could underperform as investors shift their focus towards return ratios rather than revenue growth.
