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Business News/ Markets / Stock Markets/  Quant Pick: Short covering can push Axis Bank stock towards 950 in short term

Quant Pick: Short covering can push Axis Bank stock towards ₹950 in short term

ICICI Direct has picked the banking sector stock, Axis Bank, as their quant pick, backed by derivative and quantitative data

Brochures are seen at a branch of Axis Bank in Mumbai. (REUTERS)Premium
Brochures are seen at a branch of Axis Bank in Mumbai. (REUTERS)

Bank Nifty has declined more than 6 per cent from highs where both public, private sector banks came under pressure. However, analysts at ICICI Direct believe current declines should act as a good entry opportunities for stocks like Axis Bank, which is trading near its important support of 800 levels on the long term price data.

The Axis Bank stock could be gearing up for a 11 per cent rally in just three months, the brokerage firm said. ICICI Direct has picked the banking sector stock as their quant pick, backed by derivative and quantitative data.

The brokerage house has initiated a "buy" call on the stock with a target price of 950. The time frame given is 3 months and stop loss can be kept at 758. The action can be initiated anywhere between 825 and 845.

“The open interest in Axis Bank has been on a declining trend since September 2022 and leveraged positions have declined significantly before the recent sell-off. However, marginal short additions were observed in the stock once it moved below 880 levels and the current series has seen build-up of relatively high open interest," the note said.

With the stock trading near important support of 800-820 zone, the brokerage expects a round of short covering to push the stock higher.

On the options front

The stock has seen significant build-up among Call strikes across strikes. Despite recent recovery, Call options base has remained largely intact. In just the last couple of session, marginal closure was experienced among ATM Call strikes. During the move, ATM and deep OTM strikes saw closure of positions, which is positive sign, the note stated.

At the same time, the Put open interest base is firming up at 820 and 840 Put strike from where the stock has witnessed a pullback recently. It is likely to act as strong support in the near term, it said.

The stock of Axis Bank has moved above its two years of consolidation range of 650-800 in October 2022. In the recent weakness, the stock took support at 800 levels and started showing signs of reversal.

Since the long term mean for the stock is near 760, the brokerage believes that current levels provide a good entry opportunity with stop loss near its long term mean levels.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Meghna Sen
Business journalist tracking markets, companies, economy and crypto for Livemint. She has 6 years of experience with online and print publications. Email:
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Published: 22 Mar 2023, 05:46 PM IST
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