Despite strong global cues, Indian market started the week on a negative note and slipped further during the week to the lowest level in the last three months at around the 16,900. It then saw a sharp bounce back with benchmark retesting the territory of 17,500. Post these wild moves, Nifty traded in a range for the last two days of the week and eventually ended the week with gains of 1.80 percent each against the previous week's close.
If we recall last week's outlook, we had clearly mentioned that the benchmark may see further consolidation between 16,800 and 17,500 before heading for the next leg of the action. This is precisely what has happened during the week as Nifty almost tested the lower end and closed at the mentioned higher range.
Now if we analyse the last two days' trading activity, buying was definitely seen on the intraday dips. However, we did see some tentativeness at higher levels as the benchmark has already rallied more than 3 percent from the intra-week low and has reached a cluster of resistance zone seen in the vicinity of 17,500-17,600-17,700.
During the week, we did participate in the relief move but directionally, we are still a bit sceptical whether the market has enough strength to surpass the higher boundary of this range. Hence, one needs to now start lightening up longs if Nifty extends the relief move in the coming sessions. On the flip side, we sense the base has shifted higher and the bullish gap left on Wednesday at 17,250 - 17,300 is to be seen as key support.
During the week, we witnessed many astonishing moves in midcap and smallcap stocks and traders can continue with the stock-centric approach, however, they need to be very selective going ahead as we are approaching the resistance zone.
Here are two buy calls for a week:
Bajaj Auto: Buy | LTP: Rs 3,344.75 | Stop Loss: Rs 3,280 | Target: Rs 3,440 | Return: 2.8 percent
The entire two-wheeler space has been the weakest link throughout this calendar year. When market was making new highs, this stock remained in a consolidation mode and last month, when we witnessed some correction in the market, it was among the first ones to confirm a breakdown.
As a result, the stock prices corrected ferociously and reached its cluster of supports last week. Now prices look a bit oversold and the way momentum oscillators are placed, we expect some bounce back in this counter.
We recommend buying for trading target of Rs 3,440. The stop loss can be placed at Rs 3,280.
Mahanagar Gas: Buy | LTP: Rs 915.35 | Stop Loss: Rs 889 | Target: Rs 945 | Return: 3.2 percent
This one of the rank outperformers previously has undergone a severe price correction over the past few months. In this course of action, we can see it reaching its key moving averages, where the recent hammering seems to have arrested.
Although, price wise there is no indication of any strength, we expect some pull back in coming days considering the cluster of supports and extreme oversold condition of momentum oscillators.
One can look to take a punt for a near term target of Rs 945. The stop loss can be placed at Rs 889.
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