Thakkar Sees Upside Breakout in Indian Equities Amid Short Covering

Jay Thakkar, Head of Derivatives and Quant Research at ICICI Securities, believes that Indian equities may soon experience an upside breakout. He attributes this to short covering in banking stocks, strong market breadth, and positive flows from the upcoming MSCI rebalancing.

Thakkar pointed out that despite geopolitical tensions and elevated crude oil prices, the VIX has been falling since April and is currently at pre-war levels of around 11. This indicates no major fear in the equity market and suggests that markets can rise together through short covering.

The Bank Nifty could lead this breakout, Thakkar said, with a target of 60,500 levels. The Nifty may initially inch towards 24,600 levels before reaching its eventual target of 25,000. Key supports for the Nifty and Bank Nifty are at 24,000 and 57,000, respectively.

Thakkar also noted that FII shorts have increased by almost 60,000 contracts in banking stocks, which could pave the way for an upside breakout through short covering.