Vinay Rajani
From the recent bottom of 9,951, the Nifty has risen 447 odd points, to close at 10,380 on Monday. Last week, Nifty rose 2.15 percent, resulting in a second consecutive weekly gain.
The Nifty Midcap and Smallcap indices outperformed by surging more than 4 percent and 5 percent respectively. A 50-DMA and 100-DMA are currently placed at 10,452 and 10,437 levels, respectively and are likely to act as an immediate resistance for the Nifty.
Previous top on the Nifty is placed at 10,478, which can also act as a resistance. Therefore, the range of 10,430-10,480 would be considered as a strong resistance zone. The range of 10,200-10,230 is expected to act as a short-term support zone, which happened to be the level around its 20-DMA.
Oscillators like MACD, RSI, DMI, and KST all are showing significant strength on Nifty, Bank Nifty, Midcap and Smallcap indices for the short term.
The Nifty PSU Bank Index has confirmed bullish inverse head and shoulder pattern on the daily charts, which could result into a sharp rise in the PSU banking stocks from the current levels.
The technical setup for global markets is not that convincing but Indian markets look enough resilient on the charts to extend the current up move, at least for the short term.
During the week gone by, Long build-up was seen in the Nifty Futures’ where Open interest rose by 12 percent with 2.15 percent rise in the Nifty.
A similar trend was seen in the Bank Nifty Futures’ too, where open interest rose by 3 percent with Bank Nifty rose by 2.51 percent. Nifty open Interest Put call ratio rose sharply during the last week gone by to 1.45 level from 1.38 levels.
This rise in the put-call ratio is largely on the back of Put writing at 10,200-10,300 level which added 28.5 and 21 lakh shares in Open Interest respectively; indicating Nifty is likely to find strong support in the vicinity of 10200-10300 level for the coming days.
Foreign institutional investors (FIIs) created a fresh long in the stock Futures’ segment during last week, where they bought worth Rs 2,440 crore with open interest going up by 39,683 contracts.
On the other hand, the Short build up was seen by FIIs’ in the Index futures’ segment, where they net sold worth Rs 799 crore with their Open Interest going up by 21,150 contracts.
To Conclude: Nifty could find resistance in the range of 10,430-10,480. However, the level of 10,200 is expected to act a strong support. Stock specific bullishness will continue to be there.
Any close above 10,480 would result in medium term breakout. Sectors like banks, auto, and construction, infra are likely to outperform in the coming days.
Here is a list of top 3 stocks which could give up to 11% return in the short term:
KEI Industries Ltd: BUY| Target Rs. 480 | Stop-loss Rs 402 | Return 11%
The stock has closed at its 52-week and all time high with healthy volumes. The stock has been trading above all its important moving average parameters, indicating a bullish trend on all time frames.
The stock has recently surpassed the crucial resistance of the double top placed at 423 on the weekly charts. Higher tops and higher bottoms are intact on long-term charts Oscillators like MACD, RSI and DMI have been showing strength in the existing bullish strength. We recommend buying KEI for the upside target of 480, keeping SL at 402.
KNR Construction: BUY| Target Rs. 340 | Stop-loss Rs 284| Return 11%
Infra and construction stocks have been gaining traction for the last couple of months. KNR is one of the stock which remained resilient in the recent correction started since Jan 2018.
The stock price has broken out from a narrow range of 208-300, which held for last 5 weeks. On Monday, the stock rose more than 5 percent with a jump in volumes.
The move has helped the counter to surpass the hurdle of its 20 and 50 DMA resistance. The stocks hovering near to their 52-week and all-time highs have been outperforming recently.
Oscillator setup on the short term charts is perfectly favored the fresh entry in the counter. We recommend buying KNR Construction for the upside target of 340, keeping a stop loss below Rs284.
Allahabad Bank Ltd: BUY| Target Rs. 60| Stop-loss Rs 51 | Return 10%
The Nifty PSUBank Index has confirmed bullish inverse head and shoulder pattern on the daily charts, which could result in to sharp rise in the PSU Banking stocks from the current levels.
The stock has recently surpassed the multiple top resistances placed at 53.50. The stock price has broken out from last 8 week’s consolidation range.
The Volumes have also gone up along with the price rise in recent days. The stock price has reached above its 20 and 50DMA resistances. We recommend buying Allahabad Bank for the upside target of 60, keeping a stop loss below 51.
Disclaimer: The author is Technical Analyst, PCG Desk, HDFC Securities. The views and investment tips expressed by 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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