We have seen a spectacular comeback by the bulls after the recent fall towards 10,800.
In the week gone by, the market just took off with the help of a few heavyweights.
Initially, it was the IT space that took the charge and lifted markets higher from the critical levels along with some participation from the banking space.
Any robust rally in the market is incomplete without the contribution of the banking space. Last Friday, post the RBI policy, banking stocks attracted tremendous buying interest to eventually end the week at a new seven-month high for Nifty above the 11,900-mark.
In the last couple of weeks’ rally, global markets played a major part as we are seeing some gravity-defying moves despite some in-between uncertainty.
The way Nifty surpassed the August 31 high of 11,794 with some authority and it is now within the kissing distance of 12,000, the positivity is likely to extend further.
Importantly, the banking space has some dominance which is very much in favour of the bulls. It may provide an impetus for the extended rally.
Now, the only missing factor is the participation from the broader market.
If we look at the Nifty Midcap index, in the last 7-8 sessions, they remained muted throughout and only a handful of heavyweight names lifted the market higher.
Hence, if the Midcap index breaks out from the recent congestion, it will be considered as a healthy rally.
As far as levels are concerned, the base has shifted higher and the previous resistance area of 11,700– 11,450 should now be treated as strong support.
On the flip side, we are very much close to the psychological mark of 12,000. The moment it is taken out, we may see a steady move towards 12,200–12,400 levels.
Since the banking index is back to 200-day SMA on the daily chart and the way it closed with a complete gush in the space, a move beyond 24,000 would provide strong support to the benchmark index.
However, we would like to highlight that since the move is extremely swift, we can see some intraday profit-booking anytime and hence, one needs to position accordingly and be very fussy in stock-selection.
Here are two buy and one sell call for this week:
State Bank Of India (SBI) | Buy | LTP: Rs 198.55 | Target price: Rs 208 - 212 | Stop loss: Rs 192 | Upside: 7%
Last Friday, we had a stupendous move in the banking conglomerates and the most underperforming PSU banking space, too, participated aggressively in it.
SBI, being the giant and trusted PSB of the lot, has managed to break out after a long phase of consolidation.
Due to the tail-end surge, the stock prices managed to traverse the 89-EMA on the daily chart with sizable volumes.
In addition, we can witness a positive crossover in the combination of 5 and 20 EMA which indicates the possibility of an up-move this week.
United Breweries (UBL) | Buy | LTP: Rs 991 | Target price: Rs 1,035 | Stop loss: Rs 964 | Upside: 4%
As we stepped into ‘Unlock 5.0’, the government eased a lot of restrictions on restaurants and bars. Hence, the liquor stocks saw some buying traction post this development.
Recently, UBL had undergone some selling over the past few weeks and after a brief pause, we witnessed a sudden spike in the stock prices.
If we look at the volume activity, we are seeing a decent rise, providing credence to the move.
This may not be the complete trend reversal but at least we can see a short-term bounce in the stock. Hence, we recommend going long for a target of Rs.1035 in the coming days. The stop loss can be placed at Rs.964
Grasim Industries | Sell | LTP: Rs 749.60 | Target price: Rs 715 | Stop loss: Rs 773 | Downside: 5%
In the last couple of weeks, the entire cement space had a stellar move and Grasim being the holding company of cement giant Ultratech Cement, did not move to the tune of it.
This sluggishness finally resulted in a profit-booking last Friday and despite the benchmark hitting a new seven-month high, this stock had a weak close.
The daily chart now resembles a ‘Hanging Man’ pattern (formed on Thursday), which got confirmed on a closing basis as well.
Looking at these observations, we expect the stock to underperform and witness further profit-booking in the forthcoming week.
Hence, momentum traders can look to sell on a bounce around Rs 752-755 for a target of Rs 715 in the coming days.
(The author is Chief Technical & Derivatives Analyst at Angel Broking)Disclaimer: 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.