We believe markets will see some time wise correction from current levels in the broader range of 10,300-10,700 levels over the next few weeks, says Vikas Jain
After a week marked by consolidation and announcement of a mega fraud, Vikas Jain, Senior Research Analyst of Reliance Securities Ltd provides the market outlook and three technical stock picks for the next week.
Equity Markets saw a week of consolidation after sharp sell-off during the last week. Recovery of 800 points in Dow Jones during the week after previous week’s fall has stabilised equity markets worldwide. The week was marred by the announcement of a large scale fraud involving more than Rs 11,000 crore in Punjab National Bank, which soured the sentiments for PSU Banks.
RBI also at the start of week announced new NPA recognition norms, which will lead to more reporting of NPAs from the next quarter onwards. Result season is now more or less over, in which companies have broadly performed better than expectations due to low base of earnings last year. Market will look forward to this earnings recovery continuing for the rest of fiscal as well as during FY19.
Nifty has declined by 1.2 percent as compared to the previous week and mid/small caps indices also slipped by around 1 percent. Among the sectors, PSU Banks were the worst performer with fall of nearly 8.5 percent for the week. Pharma, IT remained flattish with a negative bias of -0.5 percent. On the positive side Energy index gained by 1.2 percent for the week. India VIX has declined by 15 percent to close near to 16 levels decreasing the volatility during the week.
We believe markets will see some time wise correction from current levels in the broader range of 10,300-10,700 levels over the next few weeks. The quarterly results season is largely over and the focus would move to global market news flow. Among sectors we remain positive on Pharma, Consumer and Autos from current levels after the recent sell off while one should avoid Metals as the commodities are seeing a selloff in global markets.
CMP: 1002| RECO: BUY| TARGET: 1130-1190| STOP LOSS: 935
—CESC has retraced 40 percent of prior down-move (from Rs 1190 to Rs 938), where the stock reversed after taking support of its long-term moving averages. In the past, such kind of reversal from its long-term moving average turned out well for the stock.
—Due to recent turnaround, RSI and MACD reversed from their lower levels.
—As per the current daily set-up, we believe the stock will move upward, some decline cannot be ruled out before it retests the life-time-high.
—On the higher side, the stock will face hurdle around its 76.4 percent and 100 percent Fibonacci Retracement levels. However, in case of decline, recent swing low will work as a key reversal point.
—Thus, long position can be initiated here for the target of Rs 1130-1190 with a stop loss of Rs 935.
HDFC Bank Ltd
CMP: 1879| RECO: BUY| TARGET: 2020| STOP LOSS: 1830
—The stock is oscillating between its medium-term and long-term moving averages after witnessing sharp decline from its life-time-high.
—Due to undergoing consolidation, the key technical indicators reversed from their lower levels.
—We believe the stock will soon surpass near-term hurdles and record new high.
—Thus, long position can be initiated here for the target of Rs 2020 with a stop loss of Rs 1830.
CMP: 1268| RECO: BUY| TARGET: 1420-1460| STOP LOSS: 1200
—The stock has retraced 60 percent of prior up-move (from Rs 1113 to Rs 1336) and later consolidated between its major daily moving averages.
—Due to recent rebound in the stock price, the key technical indicator has also witnessed similar up-move from their lower levels.
—We believe the stock will soon resume its northward journey and will climb higher levels.
—Thus, long position can be initiated here for the target of Rs 1420-1460 with a stop loss of Rs 1200.
Disclaimer: The views and investment tips expressed by the 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.(Vikas Jain is Senior Research Analyst at Reliance Securities)The Great Diwali Discount!
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