Indian equities started the week gone by on a positive note despite SGX Nifty indicating a sluggish start. However, after surpassing the 17650 mark, the index slipped into a consolidation mode and for the remaining part of the session, we witnessed a slender range with undertone being strongly bullish. During the mid-week, markets had slightly turbulent moves, but we managed to weather them successfully.
In last couple of sessions, the oversold US market rebounded, which provided a much-needed trigger for Nifty to come out of the recent congestion phase. With some hint of profit booking on Friday, Nifty concluded the week convincingly above 17800 by adding 1.68 percent to the previous weekly close.
Domestic market has maintained its sturdy structure over the last couple of weeks amid a declining trend in the US. This clearly restricted our key indices to surpass the higher boundary of the consolidation range despite having an inherent strength. The moment global recovery took place, we witnessed a breakout from the sturdy wall of 17,700 – 17,800. Importantly, the banking space was the major charioteer in this rally with Nifty Bank clocking over 2.50 percent gains and closing at a 10-month high.
Whenever financial counters contribute, the rally should be construed as healthy. Moreover, IT heavyweights, which were top laggards, showed some encouraging signs towards the fag end of the week. This provided credence to the move and adds conviction to retest the recent psychological level of 18000 in the coming week itself. In fact, if global peers support, we will not be surprised to see it extending towards 18200 – 18350 levels.
We advise traders to continue with their recent ‘Buy on declines’ strategy and use decline towards the support zone of 17,675 – 17,500 to add fresh longs. Also, the broader end of the spectrum is clearly on a roll and hence, one should keep focusing on potential movers from the cash segment, which are likely to fetch higher returns.
Stock recommendations:
Carborundum Universal | Rating: Buy | Target: Rs 952 | Upside: 8%
This stock has been gaining traction from the recent swing low of Rs 794 odd zones and gradually marched above all its major EMAs on the daily time frame. Simultaneously, in the last trading session, a strong volume-based breakout was witnessed that gauged momentum in the counter and is likely to carry the same in the comparable period.
Technically, the stock looks lucrative in the current zone and has the potential to surge upwards in the near future. Hence, we recommend buying for a near term target of Rs 952. Traders can participate by following strict stop loss at Rs 837.80.
Tech Mahindra | Rating: Buy | Target: Rs 1192 | Upside: 5%
The IT space finally showed early signs of revival on Friday and this Indian multi-national company was one of the few early entrants. Technically speaking, we can see stock prices recently oscillating within the boundaries of a ‘Horizontal Wedge’ pattern.
On Friday, the stock prices finally broke out from the upper trend line, thereby confirming a bullish breakout from this configuration. With this, we can also observe it traversing the 89-day EMA for the for the first time in last 5 months. Traders are advised to buy for a near term target of Rs 1192. The strict stop loss needs to be placed at Rs 1085.
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