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

 

Quant Pick

Bank Nifty has fallen more than 6% from higher levels, as both public and private sector banks have come under pressure. However, analysts at ICICI Direct believe that the current decline will provide a good entry point for stocks such as Axis Bank, which is trading near critical support levels. Longer-term price data show the 800 level.

According to the brokerage firm, Axis Bank stock could rise 11% in three months. ICICI Direct has chosen banking sector stocks as its quant picks, backed by derivatives and quantitative data.

The brokerage firm has initiated a “Buy” call on the stock with a target price of Rs. 950. The given time frame is three months, and a stop loss can be placed.

The brokerage firm has issued a “Buy” recommendation on the stock, with a target price of Rs. 950. The time frame is 3 months, and the stop loss is 758. Action can be started anywhere between 825 and 845.

“Open interest in Axis Bank is on a declining trend since September 2022 and leveraged positions have come down significantly before the recent sell-off. However, the stock experienced a minor correction after falling below the 880 level, and the current range has seen relatively high open interest formation,” according to the note.

With the stock trading near key support at 800-820, the brokerage anticipates a period of short covering that will push the stock higher.

in terms of alternatives

The stock has seen a significant build-up amid call strikes. Despite the recent recovery, the call options base remains largely intact. Only in the last few sessions, marginal closure was experienced amid ATM call strike. The note added that during this move, positions were seen to be closed at ATM and deep OTM strikes, which is a positive sign.

Whereas, put open interest base is consolidating at 820 and 840 put strikes from where the stock has seen pullback recently. This is likely to act as strong support in the near term, it said.

 

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