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Dec 09, 2017 11:06 AM IST | Source: Moneycontrol.com

Nifty could hit new high if it conquers 10,410 by December 14; 3 stocks to bet on

For a sustainable rally to take place, the Nifty50 needs to close and sustain above its critical resistance zone of 10,500–10,600 levels on the long-term charts which should open the doors for another 10-15 percent sustainable upmove over a period of time.

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If there is going to be a setback for the ruling BJP in Gujarat then some quarters in the market may read this as a red flag to reforms till the big battle of 2019 for Lok Sabha, Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, said in an exclusive interview with Moneycontrol’s Kshitij Anand.

Q) It has been a roller coaster ride for the bulls in December series. The index is up by about 1.4% for the week ended December 8. The next week is crucial ahead of State polls as well as Federal Reserve. What kind of action could we see come next week?

A) As on today’s close, it clearly appears that the short-term bottom is in place at a recent low of 10,033 levels and we are in a pullback mode.

Whether this pullback will get converted into a new high or not it is something which we need to understand only after getting a confirmation in this regard.

We are considering 10,410 level as a trigger which if conquered by December 14 should lead to retest lifetime highs once again. This kind of confirmation is becoming essential to project further upsides.

Recently, we started a correction from the highs 10,490 and we hit a short-term bottom of 10,094 on the November 15. The market witnessed a stronger up move in the first two days itself, but thereafter, it just moved sideways and collapsed to a recent low of 10,033.

It is very difficult to categorically conclude at this point in time that market has bottomed out and we are heading for a new lifetime high just based on two-days of stronger price action.

Q) Should Market really worry about state election?

A) Yes, in the short term there could be some overhang but as dust gets settles down over a period of time, market forces will try to align itself with economic reality.

If there is going to be a setback for the ruling BJP in Gujarat then some quarters in the market may read this as a red flag to reforms till the big battle of 2019 for Lok Sabha.

Even a victory with thin margin may also prompt the government to slow down on reforms path and indulge in populist measures as some sections of the public are already in pain with bold decisions like Demonetisation and GST.

So the central government may not like to take a bigger risk by indulging in bold reforms and may tilt its balance towards populist measures which will not go down well with market participants and can trigger much awaited bigger correction.

Q) How is the market looking on the weekly as well as monthly charts?

A) Let’s talk about monthly charts first. After closing above 10,000 level for the first time ever in the month of July, the index added just around 5 percent in the last 4 months suggesting weakening momentum.

On the face of it, the index may be moving higher but incremental gains on a quarter-on-quarter basis or on a month-on-month basis seem to be narrowing. This kind of price action usually point towards a major move to occur in either direction.

For a sustainable rally to take place, the Nifty50 needs to close and sustain above its critical resistance zone of 10,500–10,600 levels on the long-term charts which should open the doors for another 10-15 percent sustainable upmove over a period of time.

Moreover, we are finding that the gap between the critical support and critical resistance is becoming narrower over a period of time.

On the downside 10,047 is becoming important whereas on the upside 10,550-10,600 is critical resistance point. The weekly charts with a hammer coupled with a strong momentum on the daily charts are clearly pointing for some more upside in the next one or two weeks.

Q) What should be the strategy -- buy on dips or sell on rallies in the coming week?

A) The strategy is clearly to buy the dips from a short-term trading perspective. But, bigger positional bets should be created only either on a breakout or on bigger correction below 10,000.

Right now we are more comfortable to trade for the short-term gains rather than investing for a 6 -12 months without a breakout.

Q) How have FIIs positioned their portfolio ahead of US Fed and state election results?

A) In November, foreign institutional investors (FIIs) invested around USD 3 billion which is looking like a second highest after USD 5 billion of investment in the current year.

This is clearly suggesting their positive commitment to Indian markets. Couple of month’s back they were on selling spree but post announcement of PSU bank's recapitalisation scheme their outlook appears to have turned positive once again.

Unless they are positive they won’t commit such bigger sums just ahead of critical events like Gujarat election or Fed policy.

Q) Top 3-5 stocks which are looking attractive at current levels based on technical?

A) Here are some stock tips for the long term:

Manappuram Finance: BUY| Target Rs130| Stop Loss Rs94| Return 26%

We like Manappuram Finance in anticipation of a breakout going forward with a long-term target of Rs130. The stop loss for this trade should be placed below Rs94 on closing basis.

LIC Housing Finance: BUY| Target Rs672| Stop Loss Rs550| Return 18%

This counter appears to be presenting a good investment opportunity as it has corrected from the highs of Rs794 registered in June 2017. Since then, it has seen a price erosion of around 30 percent.

Relentless fall seen in the last six months brought the stock down to almost a 3-year old channel support from where this counter is making efforts to bottom-out from a low of Rs550.

On stability, a bare minimum 50% retracement can take it to Rs672 levels which itself is a decent return from current levels.

Tata Motors: BUY| Possible Target Rs598| Stop Loss Rs370| Return 45%

Tata Motors is presenting a contrarian buying opportunity. The stock topped out almost a year ago at a high of Rs598 in October 2016. It appears to have hit a durable bottom at August lows of 358.

Long-term investors can buy the stock at current and add more if available around Rs380 levels with a stop below Rs370 on a closing basis.

Disclaimer: The views and investment tips expressed by the investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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