Nandish Shah
After Friday’s pullback rally, the Nifty plunged 205 points on Monday on the back of weak global cues and outcome of the state assembly exit polls which have shown a reducing vote share for the BJP in Madhya Pradesh and Chhattisgarh after 15 continuous years of run.
The Nifty has now corrected almost 500 points from the high in the last five trading sessions. The index has completed 50% retracement of the entire upswing seen from 10,004 (low of Oct 26, 2018) to 10,941 (high of Dec 3).
The next support for the index will come at 61.8% retracement level which is placed at 10,360. In the derivatives market also, we have seen put writing at 10,300 strikes.
On the upside, the resistance is seen at 10,880, which happens to be the 50% retracement of the entire fall seen from 11,760 (Aug 2018 high) to 10,004 (Oct 2018 low).
The Nifty Midcap and Nifty Small-cap indices continued their underperformance by falling more than 2 percent each. Considering the technical and derivative evidence discussed above, we believe that Nifty has already corrected almost 500 points from the high in last five sessions and reached a strong support level.
Moreover, we believe that to some extent the market has already discounted the uncertainty of the state election outcome and may see a pullback rally from here once the uncertainty of state election outcome is over.
Therefore, we advise accumulating long positions in Nifty on declines with a stop loss of 10,300 levels with targets of 10,700 and 10,880.
Here is a list of top three stocks which could give 5-7% return in next 1 month:
ABB India: Buy| LTP: Rs 1,397| Target: Rs 1,480 | Stop-Loss: Rs 1,350 | Return 6%
In the recent correction, ABB has shown strength as it is trading at a two-month high. ABB’s primary trend is positive where the stock price is trading above its 5,20 and 200-DMA.
Oscillators and momentum Indicators like RSI and MACD is showing strength on daily charts. The large-cap Capital goods stocks are showing strength since the last few days and looking good on the charts.
Therefore, we recommend buying ABB for the target of 1480 and keeping a stop loss at Rs 1350
Dr Reddy's Laboratories: Buy| LTP: Rs 2,690| Target: Rs 2,825 | Stop-loss: Rs 2,600 | Return 5%
Dr. Reddy's is one of the outperformers amongst the Pharma stocks, where it gained by 11 percent till date in the CY18 as against the 11 percent fall in the Nifty Pharma Index.
The stock price is currently trading above it's 5,20 and 200-day simple moving averages indicating that the stock is in an uptrend.
Oscillators and momentum Indicators like RSI and MACD is showing strength on daily charts. The stock price is trading at 52- week high and is likely to remain an outperformer in the coming days.
Therefore We recommend buying Dr. Reddy for the target of 2825, keeping a stop loss at Rs 2600
Berger Paints: Buy| LTP: Rs 305| Target: Rs 325 | Stop-Loss: Rs 293 | Return 7%
Berger Paint reversed northward after taking support from the gap created on 02nd November, resulting in a bullish hammer candlestick pattern on the daily chart.
The stock price has been resilient in the recent market fall and up by 11 percent in CY18 till date.
The stock price is trading above its 200-Day simple moving average indicating the primary trend is bullish.
A sharp fall in crude price also augurs well for the short to medium term. Therefore, we recommend buying Berger Paints for the upside target of 325 and keeping a stop loss at 293
Disclaimer: The author is a Technical & Derivatives Analyst at HDFC Securities. 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.
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