Indian shares had yet another forgettable week, with benchmarks ending the week more than 5 percent lower, their worst weekly showing since May 2020. The Nifty corrected sharply to end below 15,200 with a weekly loss of over 5 percent.
In the last two weeks, the Nifty has corrected from 16,800 to 15,200, on weak global cues. The momentum readings on the lower time frame chart have now reached the extreme oversold zone and such setups have usually resulted in pullback moves in the recent past.
On the daily chart, though prices have formed a lower low, the ‘RSI Smoothed’ oscillator has not yet breached the previous swing low. So, any pullback move from here would result in a positive divergence on the relative strength index (RSI) with the index.
The market has recently seen a high inverse correlation to the US dollar index and after an up move from 101.5 to 105.5, the index has shown signs of correction in the last couple of sessions. If the dollar index gives any pullback move to retrace the recent upmove, it will be seen as positive for equities.
In the derivatives segment, the majority of the positions in the index futures segment by FIIs are on the short side and short-covering by the stronger hands could lead to some up move in the near term.
Hence, traders are advised to book profits on short positions and look for buy side trading opportunities from a one to two weeks perspective.
Short-term supports for Nifty is placed around 15,000 and 14,800, while the pullback move could lead the index to 15,650 in the coming week.
Here are two buy calls for next two-three weeks:
Bajaj Finance: Buy | LTP: Rs 5419.55 | Stop-Loss: Rs 5,220 | Target: Rs 5,740 | Return: 6 percent
The stock has corrected sharply in the last couple of months along with the broader markets. However, prices are trading near the support end of the channel. The ‘RSI Smoothed’ oscillator is in the oversold zone and is hinting at a positive divergence.
Considering the chart structure, we expect a pullback move in the stock in the short term, hence traders can look for a buying opportunity for a short- term upmove.
Traders can buy the stock in the range of Rs 5,420-5,400 for a potential target of Rs 5,740 in two-three weeks. The stop-loss should be placed below Rs 5,220.
Infosys: Buy | LTP: Rs 1,387.30 | Stop-Loss: Rs 1,300 | Target: Rs 1,490-1,540 | Return: 7-11 percent
The stock has seen a sharp correction recently as the IT space has globally been in a downtrend. Though the price has breached its previous swing low, momentum readings are indicating a positive divergence.
We expect some pullback move in the market in the near term and the IT stocks could witness some up move in the next two-three weeks.
Considering the possibility of a divergence, we advise traders to buy the stock from a short-term perspective.
Traders can look to buy the stock in the range of Rs 1,390-1,370 for potential targets of Rs 1,490 and Rs 1,540 in the near term. The stop-loss can be placed below Rs 1,300.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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