It was the bear's week on D-Street as the Nifty50 lost 4.77% and closed at 23,587. The index had recently sparked hopes of a bullish rally after bouncing from 23,700 to 24,800, but last week (ending December 20), fear again gripped the markets. The sentiment has shifted as the Nifty50 slipped below its crucial 200-day exponential moving average (200DEMA) of 23,691, inclining towards the bears.
In times of volatility, the broader market might seem bleak, but certain sectors still display growth potential. Among these, midcaps and smallcaps show signs of strength, particularly with the Nifty Midcap150 and Nifty SMLCAP250 trending by 4% and 5%, respectively, above their respective 200DEMA levels. This suggests that readers should shift their focus from largecap stocks to those in midcap and smallcap segments for stock-specific opportunities.
To make informed decisions in such a market scenario, we turned to check the sectors that are outperforming the broader market index. We ran the Smart Relative Strength (RS) scanner by Definedge to find these. The sectors with the highest positive scores from the scanner were found to be the textile and plastic sectors. While we discussed the textile sector in last week’s article, this week, we focus on the plastic sector, which shows strong potential for continued growth.
The Definedge Plastic EQW Index
The Definedge Plastic Index is an equal-weighted index comprising 35 stocks related to plastics. It represents a broad spectrum of companies in the plastics sector and offers a balanced view of its overall performance.
Definedge Plastic, Monthly Chart
The Definedge Plastic Index has been trending upward monthly, signalling a bullish primary trend. Whenever the index breaks past previous highs, it has historically led to further rallies, and right now, it has breached a previous high, retested it, and is poised for a northward journey.
With the broader market uncertain, the plastic sector stands out. It is trending near its all-time high and showing strong technical indicators for the weeks ahead.
Stock in Focus
Among the top performers in the Definedge Plastic sector, Emmbi Industries has stood out.
Emmbi Industries specialises in manufacturing various plastic products, including flexible packaging materials.
On the 1% X 3 Daily Point & Figure (P&F) chart, the stock initially broke out at Rs 130, and after a retest, a follow-up breakout occurred at Rs 157. This indicates strong demand for the stock, which closed 2.5% higher last week (ending December 20), even as the broader market saw significant losses. This is the first stock the readers can potentially add to their buying watchlist.
Kingfa Science & Technology India
Another stock making waves in the Definedge Plastic Index is Kingfa Science & Technology India. This leading player in the plastic industry is known for producing high-performance plastic compounds and alloys used in a wide range of applications, including automotive, electronics, and consumer goods.
The stock has recently broken out from a falling trendline, as evidenced by the 1% X 3 Daily P&F chart, signalling a potential resumption of its bullish momentum. Furthermore, the breakout from a Double Top Buy (DTB) pattern on the P&F chart reinforces the bullish setup, suggesting that the stock may potentially continue its upward trajectory in the coming weeks.
To conclude, the plastic sector has shown strong relative strength, and stocks like Emmbi Industries and Kingfa Science & Technology India stand out for their technical strength and growth potential.
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. This article is strictly for educative purposes only.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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