Nandish Shah
The Nifty fell nearly 1,000 points since the Budget (July 5), largely on the back of relentless selling by foreign institutional investors (FIIs) to close at the lowest level since February 28, at 10,862 on August 5.
The Nifty Mid-cap and Small-cap indices plunged 11 percent and 15 percent respectively, since the day of Budget to date. The Nifty Small-cap Index is down nearly 45 percent from its January 2018 high, while Nifty is down by about 10 percent from its all-time high of 12,103 recorded in June.
In 2008, when the S&P BSE Sensex breached its 200-DMA for the first time; there was 54 percent of BSE all-listed stocks which were trading below their long term average.
If we look the current scenario, the S&P BSE Sensex breached its 200-DMA for the first time on 1st Aug 2019 and on that date, 83 percent of the BSE universe was trading below their respective long term average of 200-DMA.
Coming back to Nifty, it has breached the crucial support of its 200-DMA last week, which is currently placed at 11,155. This previous support of 200 DMA will interchange its role as resistance going forward. Far resistance comes at 11,300.
Nifty is currently placed below its 50,100 and 200-DMA and has been forming bearish lower tops and lower bottoms. Long term trend line adjoining bottoms of February 2016.
We believe that the market is near strong support and we may see a pullback rally from here. Therefore, our advice would be to avoid going short from here.
And, if the Nifty crosses the 10,896 levels, we advise creating fresh longs in Nifty with a stop loss of 10,780 levels. On the higher side, we may see levels of 11,150-11,300 for the coming weeks
Here is a list of top three stocks which could give 6-7 percent return in the next three to four weeks:
Tech Mahindra: Buy| LTP: Rs 648| Target: Rs 695| Stop-Loss: Rs 625| Return 7 percent
After forming a double bottom around 610 odd levels, Tech Mahindra reversed northwards to close above its 5-day simple moving average (SMA).
Oscillators and momentum indicators like RSI and MACD turned bullish on the daily charts. The recent fall in the rupee against dollar augurs well for the technology stocks.
Therefore, we recommend buying Tech Mahindra at the CMP of Rs 648 and average at Rs 635 for the target of Rs 695, and keep a Stop Loss below Rs 625.
Dabur India: Buy| LTP: Rs 430| Target: Rs 455| Stop-Loss: Rs 415| Upside 6 percent
Dabur India has given a breakout on the daily chart on August 5 by closing above the resistance level of 428 levels. The primary trend of the stock is bullish where the stock price is trading above its 5, 20 and 200-Day SMA.
Oscillators and momentum indicators like RSI and MACD showing strength in the stock on the daily as well as weekly charts.
In the F&O segment, we have seen a long build-up in the stock during the August series till now. Therefore, we recommend buying Dabur India for the upside target of Rs 455 and keep a stop loss below Rs 415.
UPL: Sell| LTP: Rs 541| Target: Rs 505| Stop-Loss: Rs 565 | Downside 7 percent
UPL has broken down on the daily chart by closing below the support level of 555 levels with higher volumes. In the derivatives, we have seen an aggressive short build-up in the UPL Futures’ yesterday.
Oscillators and momentum Indicators like RSI and MACD is showing weakness on daily and weekly charts.
The primary trend of the stock is negative where the stock price is trading below its 5, 20 and 200-day SMA. Therefore, we recommend selling UPL for the target of Rs 505, and keep a stop loss above Rs 565.
(The author is Assistant Vice President, PCG at HDFC Securities Ltd)
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