Short-covering is expected to limit the downward swing till expiry, and hence it will be advisable to remain cautious and remain stock specific
The Indian equity market closed in the deep red for the two consecutive sessions in a row despite attempting to rebound from lows.
It witnessed a massive sell-off across housing finance companies (HFCs) largely on account of exposure towards downgraded property-developer. IT stocks were weighed down by proposed changes in H-1B visa.
In the wake of the range-bound trade, the Nifty index failed to sustain above 10,500 after touching a high of 10,710 levels. It slipped from important support levels to touch a week-low of 10,294.
The drag during the week was primarily led by fall in Nifty IT, Auto, and Media which were down by 1.4 percent, 0.6 percent, and 1.1 percent respectively. The Nifty FMCG was top gainer and rose by about 5.4 percent during the week.
The index formed a bearish “spinning-top” kind of candlestick pattern on its daily price chart after forming a ‘bearish engulfing’ in the previous session.
On the weekly price chart, it formed a bearish pattern indicating a rejection of upward rally. The weekly RSI on the chart stood at 36, while MACD continued to trade below its signal line.
As Nifty continues to trade below crucial moving average, the upper resistance is seen at 10,770 with strong support placed at 10,200.
Short-covering is expected to limit the downward swing till expiry, and hence it will be advisable to remain cautious and remain stock specific. We maintain a short-term rangebound trade for the index at 10,710 on upside and 10,260 on the downside.
Here is a list of top three stocks which could give 3-6 percent returns:
ITC: Buy| Target: Rs 306 | Stop loss: Rs 275 | Return: 6 percent
ITC witnessed a healthy correction of about 17 percent in the last two-month from its 52-weeks high placed at Rs 322 towards a low of Rs 265.
However, the scrip witnessed a strong upward reversal for an extended period despite a negative market breadth, and witnessed a decisive breakout from its long-term 200-days EMA level placed at Rs 283.
It also saw a substantial volume growth in the last one week at the current level which translates to a reversal in trend. The RSI level stood upward at 50 while MACD had no significant trend. We have a buy recommendation for ITC which is currently trading at Rs. 289.5
NIIT Technologies: Buy| Target: Rs 1,288| Stop loss: Rs 1,220 | Return: 4 percent
NIIT remained on uptrend trajectory during last week after trading on a rangebound level for over one month. It made a correction from price-band of Rs 1,272-1,193 towards a low of Rs 1,043 before initiating the current upward trend.
It managed to break out from its 100-days level placed at Rs 1,170 coupled with strong volume growth which indicates that the buying sentiment is active at the current level.
The momentum indicator outlined a positive trend at the current level with weekly RSI at 55 and gradually moving upward. MACD is likely to witness bullish crossover in the coming sessions to trade above its signal line. We have a buy recommendation for NIIT Technologies which is currently trading at Rs 1,238.3.
Avenue Supermart: Sell| Target: Rs 1,201 | Stop loss: Rs. 1,268 | Downside: 3 percent
Avenue Supermart has continued to be under stiff selling pressure over the last one month and has slipped below its long-term crucial levels of 200-days EMA placed at Rs 1,393.
Despite its attempt to reverse the trend during a couple of sessions, it has failed to sustain the rally to form long bearish candlestick pattern on the daily price chart.
The scrip currently holds a strong support at Rs 1,175 and a breach below this level will trigger another leg of the downward rally.
The RSI stands at 31 while MACD continues to trade below its signal line, indicating a weak trend for the scrip. We have a sell recommendation for Avenue Supermart which is currently trading at Rs 1,234.3.Disclaimer: The author is Founder & CEO, 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.