We advise investors to approach with caution for a fresh long position with strict stop loss. Maintain a range-bound trade for the index at 11,320 on the upside and 10,920 on the downside, says Dinesh Rohira of 5nance.com
In the week gone by, the Indian equity market witnessed sell-off weighed down by fear of liquidity crunch in NBFCs, sustained weakness in rupee coupled with constant trade tension between China and the US.
Many sectoral indices saw a substantial decline particularly in financial, realty, and in the auto space. The market breached from the crucial support level placed at 100-days EMA on account of the selling spree.
During the week under review, the Nifty index slipped from the important support level of 100-days EMA placed at 11,100 and further broke below 11,000 to hit a weekly low of 10,866 over a massive selling in financial stocks.
Despite Nifty index closing on a positive note in Tuesday’s session at 11,067, the index is down by 1.87 percent on the week-to-week (W-o-W) basis.
The drag dominantly came from the financial sector, Realty, and Auto index which was down by 7 percent, 13.59 percent, and 5.87 percent respectively. IT index was the top gainer with a 0.7 percent rise.
Nifty rebounded from the lower band intraday to form a small bullish pattern. On the weekly price chart, the index formed a ‘bearish hammer’ kind of candlestick pattern as it continued to trade below the crucial mark of 11,100.
The weekly RSI on chart stood at 51, down from the previous level of 58, while MACD made a bearish crossover during the last week and continued to trade below the signal line.
The immediate hurdle for the index is currently placed at 11,411, while 200-days EMA at 10,774 remains a crucial support for the index.
The cascading fear of liquidity crunch in NBFCs weighing on sentiment coupled with F&O expiry in next two sessions, the Nifty is likely to witness volatile setup in the short-term.
Although it is likely to witness marginal rebound over a short-cover ahead of this expiry, as internal advance-decline ratio indicates a negative setup.
We advise investors to approach with caution for a fresh long position with strict stop-loss. We maintain a rangebound trade for the index at 11,320 on the upside and 10,920 levels on the downside.
Here is a list of top three stocks which could give 4-6 percent return:
Biocon: Buy| Target: Rs 738 | Stop loss: Rs 680 | Return: 5 percent
Biocon witnessed a considerable correction from Rs 676 towards Rs 553 during the past sessions and took a strong support from its 200-days EMA placed at Rs 578.
Thereafter, it continued to trade on an upward trajectory for consecutive sessions to form a 52-weeks high at Rs 708.85. Despite a marginal correction of last week, the scrip rebounded strongly to trade above its short-term moving average level placed at Rs 665, and thus indicating a buying regime at the current level.
The momentum indicator outlined a positive trend with weekly RSI inching upward at 68 coupled with positive crossover on MACD which is trading above the signal line. We have a buy recommendation for Biocon which is currently trading at Rs 701.55.
Oil & Natural Gas Corporation: Buy| Target: Rs 193 | Stop loss: Rs 174 | Return: 6 percent
After consolidating from a price band of Rs 189 towards Rs 153 on its six-month price chart, ONGC witnessed a strong rebound to trade near the upper band of Rs 189 again.
During the week, it made a crucial breakout from both 100 and 200-days EMA levels placed at Rs 174 and Rs 171 respectively which indicates buying interest. It also saw a substantial volume support at a current level and managed to close with about 6 percent gain on weekly basis.
The weekly RSI stood at 65 with positive price divergence while MACD witnessed a bullish crossover during past trading sessions. We have a BUY recommendation for ONGC which is currently trading at Rs 182.3.
Jet Airways: Sell | Target: Rs 184 | Stop loss: Rs 205 | Return: 4 percent
Jet Airways continued to remain under selling regime on both short-term and long-term price charts, and formed a 52-week low of Rs 188.5 in the current session.
The scrip continued to trade below its 100 and 200 days moving averages and declined over 27 percent last week. Along with the formation of the lower band on the daily price chart, it also saw a subdued volume growth in the same period.
The RSI on an oversold zone stood at 18 while MACD continued to trade below its signal line, indicating selling regime. We have a sell recommendation for Jet Airways which is currently trading at Rs 192.4.Disclaimer: The author is Founder and CEO of 5nance.com. 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!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .