Nandish Shah HDFC Securities
The Nifty extended last week’s gains on Monday, gaining 80 points to close at a record high of 11,552. The Nifty Midcap 100 and Nifty Smallcap 100 indices rose 0.80 percent and 0.40 percent, respectively.
The advance-decline ratio remained positive for the second day in a row. The Nifty is trading above all important moving averages and has been maintaining its higher tops and higher bottoms set-up, which indicates that the positional trend is bullish.
The directional movement indicator has signalled a momentum buy on weekly charts, which could extend the rally in the Nifty. Supports are seen at 11,400, with resistance around 11,750 levels.
The Bank Nifty is in an uptrend. It gained 0.5 percent on Monday to close at 28,274 levels. The index is only 50 points shy of hitting its fresh closing high. Strong support is seen at 27,750 levels, which should be kept as a stop-loss in longs. Our positional target for the index is around 29,600 levels, which is a 5 percent upmove from current levels.
In the derivatives space, we have seen long positions being built in the Nifty and Bank Nifty futures during the last few days. Foreign institutional investors (FIIs) created fresh longs in stock futures during the August series till date. Among options, put writing was seen at 11,400-11,500 strikes, while calls have been written at 11,700-11,800 levels.
Considering the evidence discussed above, we advise accumulation of long positions in the Nifty with a stop-loss of 11,400 and a target of 11,750.
Here is a list of top three stocks that could return 6-10 percent in the next 1 month:
Tech Mahindra Ltd: Buy| LTP: Rs 688 | Target: Rs 730 | Stop-Loss: Rs 665 | Return 6%
Tech Mahindra has broken out from the downward sloping trendline, adjoining the high of 28-June, 01-August and 14-August 2018 on the daily chart by closing above the Rs 675 levels with higher volumes.
The short-term moving averages are trading above the long-term moving averages, indicating a bullish trend. The momentum indicators and Oscillators are indicating strength in the stock for the short to medium-term.
Technology as a sector is doing well and looking good for the short-term. Therefore, we recommend buying Tech Mahindra for the upside target of Rs 730 and keeping a stop loss placed below Rs 665.
RBL Bank: Buy| LTP: Rs 591 | Target: Rs 640 | Stop-Loss: Rs 565 | Return 8%
RBL Bank has given a Symmetrical Triangle breakout on the daily charts on Monday, indicating a continuation of an uptrend. The stock price has also broken out from the downward sloping trend line, adjoining previous two weekly tops.
Volumes have been rising along with the price rise for the last four sessions. The stock price has been trading above 20, 50,100 and 200-DMA indicating the stock is in a strong uptrend.
Indicators like MACD and ADX have turned bullish on the daily and weekly charts. Therefore, we recommend buying RBL Bank for the upside target of 640, and keeping a stop loss below at Rs 565.
Amara Raja Batteries: Buy| LTP: Rs 892| Target: Rs 980 | Stop-Loss: Rs 845 | Return 10%
Amara Raja Batteries has broken out from the downward sloping trendline on the weekly chart, adjoining the high of the week ending 09-September 2016, 07-October 2016 and 11-May 2018 by closing above the 875 levels with higher volumes.
The stock price has also given a breakout on the daily chart on Monday by closing above the previous resistance level of 887 to close at 52 week high.
The momentum indicators and Oscillators like RSI and MACD are showing strength in the stock for the short to medium-term. Therefore, we recommend buying Amara Raja Batteries for the upside target of 980 and keeping a stop loss placed below Rs 845.
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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