Vikas Jain
Nifty tested its 100-day average and reversed with profit-booking across sectors and stocks over the last 3 days.
We continue to believe the upside is being capped at higher levels and one should wait for declines to enter near 9,600 which is the gap area it had left in the last week of May F&O expiry.
The sharp fall on Thursday’s trade has dented the immediate up move and any bounce on the higher side should be used to reduce leveraged positions from high beta sectors like realty, metals and mid-caps as they had a strong move in the last fortnight.
India VIX is trading flat, holding its 200-day average and any spike above its medium-term average at 35 levels could increase volatility.
Among sectors IT, Energy and FMCG are resisting crossing its 200-day average, trading flat to negative week-on-week.
We expect these sectors to lead the up move from lower levels so investors should focus on adding names from these sectors.
One should remain cautious in mid-caps, realty and auto sector. We expect a further correction from current levels.
Here are three stock recommendations for the next 3-4 weeks:
Infosys | Buy | LTP: Rs 703.80 | Target price: Rs 780 | Stop loss: Rs 660 | Upside: 11%
The prolonged consolidation and huge underperformance could reverse by crossing its 200-day average on the higher side.
Multiple support levels in the range of Rs 670-680 levels would be protected and offers a good risk-reward ratio from the current levels.
Daily RSI is trading above 60 levels indicating a bullish setup for the stock having an upper hand.
Berger Paints | Sell | LTP: Rs 491.50 | Target price: Rs 440 | Stop loss: Rs 528 | Downside: 10%
The stock has made a lower top on weekly charts and witnessed a sharp reversal with higher volumes and selling with negative divergence on daily charts.
The breakdown of long and medium-term averages and RSI cutting downwards from the top would put pressure on the downside.
Bajaj Auto | Sell | LTP: Rs 2,718 | Target price: Rs 2,480 | Stop loss: Rs 2,940 | Downside: 9%
The stock is facing resistance in crossing the 200-day average over the last few days. It is trading weak, confirming a downtrend.
A sharp upmove from Rs 1,800 levels and 200-week average resistance at Rs 2,879 on the higher side could cap the upside so we expect a pullback on the downside.
Its Relative Strength Index has reversed from the higher side on the daily charts and we expect it to break down, giving a sell signal.
(The author is Senior Research Analyst at Reliance Securities)
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