Monday Watchlist: HDFC Bank, ICICI, DLF in focus as private banks, realty signal reversal

The reduction in index future longs point to caution as Nifty is near the psychological mark of 23000. Large caps Vs small caps: Diverging trends Despite the rise last week, we see that even as 70% of Sensex constituents closed above their respective 10 day SMA, only about 35% of the Nifty 500 constituents closed above this key short term benchmark. This points to a familiar trend wherein market recovery led by index heavyweights is not reflected in the broader market, with only 28% of Nifty Small Cap 250 index constituents closing above the 10-day SMA.

Among key Nifty sectoral indices, Pharma showed the most positivity, pushing 90% of its index constituents above the 10-day SMA. Meanwhile, Nifty consumer durable index is seen pulling back above its 5-day SMA, while it is the farthest from its 50-day SMA, which is 8.39% higher. Its bounce from Supertrend support, followed by a move back above the 20-DMA, gives the recovery a firmer footing. Momentum indicators are lending support too: the MACD has delivered a bullish signal-line crossover, while the RSI is holding firmly around 50.

Together, these signals suggest that buying interest is strengthening. The recovery could initially take the index towards 26,900, with the 27,300-27,350 zone coming into focus if momentum holds. Stock-specific setups also look constructive, with HDFC Bank, ICICI Bank and Kotak Mahindra Bank well positioned to lead the recovery in the coming sessions. Derivative positioning adds a mixed-to-positive undertone.

HDFC Bank, ICICI Bank and Kotak Bank are seeing call-side short covering/long build-up alongside strong put writing, pointing to improving bullish sentiment. Even so, the setup is not without conditions. The reversal outlook remains constructive as long as 26,500 holds, making this the key level to watch on any renewed weakness. A sustained move above 27,350 would strengthen the recovery structure further and could open the door to an extended upside.

Realty Index shows early signs of a reversal The Nifty Realty Index is showing early signs of a potential reversal, having broken above the resistance of a declining wedge pattern. This gives the recovery attempt a more encouraging backdrop, though it is still too early to call a broader trend change. Momentum is improving as well. The daily MACD has moved above its signal line, while exhaustion in the weekly MACD histogram suggests that the earlier bearish momentum is fading.

A weekly bullish Marubozu candle adds further weight to the recovery attempt. DLF and Godrej Properties are seeing healthy put-side positioning, suggesting support at lower levels, while Prestige Estates is witnessing improving call-side long build-up. Lodha remains relatively balanced. This makes the recovery worth watching, while keeping conviction stock-specific rather than treating the entire sector as equally strong.

The index could first test 840, which serves as the next checkpoint for the rebound. A sustained move above this level could extend the recovery towards the 870-890 resistance zone. Confirmation of a broader trend reversal is still awaited. On the downside, 790 is the crucial support. Holding above it should keep the recovery structure intact. About author The author is Anand James, Chief Market Strategist at Geojit Investments.