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Last Updated : Dec 28, 2017 09:13 AM IST | Source: Moneycontrol.com

Hold Tight! More record highs for Nifty in 2018 likely; 3 stocks which can give up to 38% return

The outperformance of mid and small cap segment is likely to continue as markets set eyes on earnings and Budget expectations.

 
 
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Dharmesh Shah

ICICI Direct.com Research

Equity benchmarks reacted positively to the assembly election results earlier in the month of December which pushed the index to fresh all-time high.

The weekly price action resulted in a strong bull candle that overhauled past six week’s consolidation, signalling culmination of a corrective phase and resumption of an uptrend.

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Going forward, we expect the index to head towards 10,600 in coming weeks as it is the 123.6 percent retracement of six weeks correction (10,490-10,033).

The key factor providing confidence in the current up move is the strength of broader markets vis-a-vis benchmarks. The NSE midcap and smallcap index continue to move higher forming fresh all-time high, highlighting strength across a larger section of the market.

The outperformance of mid and small cap segment is likely to continue as markets set eyes on earnings and Budget expectations.

On the weekly closing basis, the index has continued showing respect to the long-term trend line joining the lows of December 2016 and September 2017.

Sustaining above the long-term trend line suggests the market internals remain robust and bodes well for the continuance of the primary up trend.

We believe the index has factored in US Fed interest rate hike and the recent volatility has made a strong base around 10,000 mark as the lows of the last three weeks are also around the same.

We have now revised our immediate support base for the index upwards to 10,200 regions as it is the confluence of following:

- The present value of long-term rising trend line joining the lows of December 2016 and September 2017 lows around 10200 levels

- The 61.8% retracement of the recent up move from 10033 to 10501 placed around 10212

Here is a list of top 3 stocks which can give up to 38% in next 6-12 months:

Axis Bank: BUY: CMP Rs554| Target Rs638| Stop Loss Rs485| Return 15%| Time Frame 12 months

The consolidation in the broad range of Rs547-480 of the last nine months is approaching maturity as the stock is on the cusp of a breakout from the recent consolidation pattern.

We believe the current consolidation has approached maturity and the stock is likely to resume its prior uptrend.

The share price of Axis Bank after the strong up move in the CY14 has been trading in a range in the last three years while consuming 33 months in retracing just 61.8% of the previous 13 months rally from Rs217 to Rs654 signalling a healthy consolidation and a robust price structure

The stock has major support around Rs485-490 range as it is confluence of the long-term trendline support joining the lows since CY14 as can be seen in the adjacent chart and the base of the recent consolidation

We expect the share price to resolve higher from hereon and head towards Rs640 levels in the medium term as it is the 161.8% extension of the previous up move (Rs425-547) as projected from recent trough of Rs448, which also coincides with the high of September 2016

Bharti Airtel: BUY| CMP Rs535| Target Rs668| Stop Loss Rs445| Upside – 25%| Time Frame 12 months

The stock recorded multi fold rally from March 2003 low of ~16 to the December 2007 high of Rs592 the share price of Bharti Airtel retraced 61.8% Fibonacci level of entire four and half years dynamic up move.

Since then it has been consolidating in a broader range of Rs216 – 452 for past 10 years, advocating healthy price and time correction.

The recent developments on price front indicate structural change as it is on the conclusion of the 10 years corrective phase and signal resumption of the primary uptrend.

The breakout was supported by the strong volume of more than double of the 12 months average volume of 10 cr. share per month signaling larger participation in the direction of the trend.

As per change in polarity concept, the earlier swing high of 450 would act as an immediate support for the stock. The aforementioned technical evidence suggest that the stock is gearing up for the move to novel orbit.

We expect the share price to surpass the life time high of Rs592 level and head towards Rs688 levels in the long term as it is the measuring implication of range breakout (Rs452-216=236 points) added to the breakout area of Rs452 project upside towards Rs688 (452+236=688)

RCF: BUY| CMP Rs94| Target Rs130| Stop Loss Rs68| Upside 38%| Time Frame 12 months

Recent developments on the price front suggest that the stock has registered a breakout above the elongated corrective phase of last ten years, thereby providing a fresh entry opportunity to long-term investors.

Last 6 months up move has been supported by highest ever cumulative six months volume of 52 crores, indicating transformed demand.

Past 10 years consolidation has taken a shape of a ‘Symmetrical Triangle’ pattern on a monthly chart. A decisive move above the breakout level of the aforementioned pattern suggests structural change in the long-term chart.

On the other hand, the stock has major support near 61.8% retracement level of major up move (Rs 40-106) placed at Rs68 levels. Correspondingly, the monthly MACD (E-12/26/9) is seen diverging from its nine period’s average thus supports the bullish bias in the stock.

Therefore, we believe the stock is attractively poised above the major breakout area and provides a good buying opportunity from a long-term perspective.

We expect the stock to head towards Rs132 levels in the long term as it is the 123.6% extension of the previous up move from Rs54 to Rs99 as projected from the recent trough of Rs75 signals upside towards Rs132 which also coincides with the high of high of November 2010.

Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. The views and investment tips expressed by investment experts on Moneycontrol.com are their 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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First Published on Dec 28, 2017 09:13 am
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