Nifty Metal shines to support benchmarks

Indian benchmark indices washed of three days losing streak on Thursday and bounced back amid robust performance from PSU banks and metal stocks. Nifty and Sensex witnessed a slight gap-up opening on Friday and are trading marginally up driven by continued strong performance by the metal stocks.

Nifty Metal index is nearly 1.5 per cent up and has breached all-time high levels for the third day in a row. Upbeat commodity prices, majorly the global base metal prices, pulled the metal stocks up and thereby helped the Nifty Metal index to continue outperforming since the beginning of 2018.

After Realty index, the Nifty Metal index outperformed the markets by gaining nearly 48.5 per cent in 2017. Bounce back in the metal majors like Vedanta, Tata Steel and Hindalco after May 2017 led to this exuberant move in the index. These frontliners are currently trailing at their multi-year high levels.

Technically, the cup and handle pattern breakout in July 2017 led to a sharp upbeat in the index. Thereafter, barring November 2017, Nifty Metal has continued to move up. We hold our long-term view of 4626, followed by 4985 as our next major resistances. The index is trailing in the over bought zone since August 2017. Hence, if the index corrects with profit booking in the major metal stocks, we hold 3860-3665 as our immediate supports, followed by 3520 levels.