Technically, Nifty MNC has completed a corrective pattern at 11,700 and is started moving higher to erase recent losses.
On Friday, Indian markets jumped sharply gaining about 2,000 points on the S&P BSE Sensex and nearly 600 points on the Nifty50.
The benchmark indices posted their biggest single day gain in 10 years after FM Nirmala Sitharaman announced a slew of measures including the corporate tax rate cut, putting India back on track to become a $5 trillion economy.
The government slashed the base corporate tax from 30 percent to 22 percent. It is big positive for banking, NBFCs, consumer durables, retail, auto and logistics in the long run.
Technically, the Nifty has given a major technical breakout on the daily, as well as, the weekly basis by closing above the level of 11,150.
The index was consolidating in the range of 11,150 and 10,650 for the last 21 days. It was Fibonacci count and turning date for the market.
Generally, the market reverses direction on the day of Fibonacci count, especially if it is at major support or resistance area. On Friday, by closing above the level of 11,181 (previous high) and above the resistance of 200-Days SMA at 11,225, the Nifty has set in a target of 11,600 to 11,772.
On the downside, 11,100 and 11,000 would be major supports and buying is advisable around the same. In the previous week, the number of indices closed higher with massive gains, however, Nifty MNC did extraordinarily well.
On the daily closing basis, it closed 7.51 percent higher and on the weekly closing basis, the Nifty MNC added 5.19 percent. The best part of the index is that it includes those companies that have a foreign shareholding of over 50 percent.
Top constituents by weightage are Consumer goods, Automobile, Industrial manufacturing and Metals. These include HUL, Maruti Suzuki India, Britannia, Vedanta, and United Spirits.
Coincidentally, it includes those sectors that are beneficiaries of the above announcement and its representatives are FIIs favorite.
Government’s big bang move would certainly help FPIs to bring fresh inflows for India. If we compare Nifty MNC since 2011 with the Nifty50 then it has outperformed several times, especially when there were drastic changes in terms of policy reforms or change in the leadership.
Technically, Nifty MNC has completed a corrective pattern at 11,700 and has started moving higher to erase recent losses.
On a weekly basis, it has formed "falling wedge" formation, which is a bullish consolidation and on Friday it had broken the upward boundary of it. It has strong bullish implications.
Based on the above technical evidence, we can expect 14,400 in the next few weeks, which is nearly 10 percent upside from current levels.
Some of its major constituents have formed bullish formation on a monthly basis. The biggest contributor to the rally, Hind Unilever has broken the upward barrier of ascending triangle at Rs 1,870.
HUL has formed a bullish continuation pattern which would lift the stock towards levels of Rs 2,250 in the near future.
Maruti Udyog has started upward pullback after the relentless fall seen from Rs 9,996 to Rs 5,446. The pullback can extend up to Rs 7,600 on the minimum side and Rs 8,255 on the higher side.
Britannia has completed corrective, "ABC" pattern at Rs 2,300 and is again heading for Rs 3,450 with a major resistance placed at Rs 3,100.
Vedanta is diverging positively on a monthly basis, which is an indication of a likely shift in the prevailing trend and could move towards Rs 185-195.
United Spirits has a weightage of 5.72 percent in the Nifty MNC index. It is forming a symmetrical triangle pattern on a monthly basis which means that systematic buying is happening in the stock.
It has already tested the lower boundary in the month of October 2018 and is heading for an upward boundary which is placed at Rs 800 that is approximately 30 percent away from current levels.
In brief, the Nifty MNC, and its representatives, have a decent upside from the current levels (based on technical analysis) and positional traders should search for buying opportunities whenever it would fall to major supports.
(The author is a senior VP (Technical Research), Kotak Securities)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.The Great Diwali Discount!
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