On July 5, the Finance Minister presented the Budget after which we witnessed a massive sell-off in the market, which wiped out most of the weekly gains.
Since the last few months, the benchmark index has been showing tremendous outperformance, but the broader market continues to remain lacklustre.
Ahead of the Union budget, investors were expecting some triggers that will boost confidence back into the mid- and smallcap pockets.
However, the kind of reaction we saw on July 5 clearly suggested disappointment and hence we had an adverse reaction once the budget commentary concluded.
With this, the water has been poured on all expectations and market participants again have to wait for some other ray of hope.
As far as levels are concerned, we closed precisely at the key psychological level of 11,800. The next support zone lies around 11,700-11,630 levels.
At this juncture, it’s hard to give any possible direction for the forthcoming week. We need to see how the market reacts in the first half. Till the time, 11,630-11,591 levels are not violated the broader structure does not get distorted. But in case if it happens, then get ready for some sharper cuts in the market.
On the higher side, 11,900-12,000 remains a sturdy wall. On July 5, the banking space showed resilience and didn’t participate at all in the correction, which is the only positive takeaway. If the market has to regain strength, the banking space needs to take a charge.
Also, the IT and midcap space witnessed a complete selloff and hence we need to see whether the correction is overdone or yet to extend further. At present, traders are advised to stay light and it’s better to adopt a confirmatory approach for a while.
Here is a list of top two stocks which could return 5-6 percent in the next 3-4 weeks:
Colgate Palmolive India: Buy| LTP: Rs 1178.20| Target: Rs 1250| Stop Loss: Rs 1137| Upside 6%
On the Budget day, we saw sheer outperformance in some of the FMCG counters and this marquee MNC name was clearly one of them. Technically speaking, this stock has formed a structural higher bottom at Rs 1120 and has now closed near the previous swing high with a bullish candlestick pattern.
The said pattern is witnessed with a good increase in volume and with the momentum oscillator i.e. RSI crossing above its previous swing we sense an early sign of a bullish breakout.
In addition, prices have closed above 20-SMA and 50-SMA, indicating that the short to medium term trend for the stock has turned positive. Looking at all the above scenario, we recommend buying for a target of Rs 1250 and the stop loss should be fixed at Rs 1137.
United Breweries: Buy| LTP: Rs 1380.80| Target: Rs 1450| Stop Loss: Rs 1338| Upside 5%
This midcap name has been consolidating of late after having a remarkable calendar year 2018. This consolidation itself is a sign of strength if we compare it with the broader market destruction in last one and half a year.
In fact on Friday too, it was clearly bucking the trend. On the daily chart, last week, we witnessed a breakout from the recent small congestion zone and Friday’s up move indicates the possibility of giving a decent price move in the next few days.
Thus, traders can look to initiate longs at current levels for a target of Rs 1450 and the stop loss should be fixed at Rs 1338.
(The author is Chief Analyst- Technical & Derivatives, 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.
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