Dinesh Rohira of 5nance.com advises traders to remain selective and use the rally to book profit
The India equity market remained strong throughout last month’s expiry-week to post its best performance with a gain of about 7.2 percent on an expiry-to-expiry basis.
The current rally was primarily aided by dovish commentary from the Federal Reserve Chairman Jerome Powell on the slow pace of interest rate hike that helped the local currency appreciate above Rs 70 levels. Softening crude oil prices to around $58 per barrel further boosted sentiment.
Last week, the Nifty managed to break above its resistance placed near its 200-day exponential moving average around 10,770 levels on a closing basis and touched a weekly high of 10,883.
It made a weekly low of 10,490 levels, which now remains at a crucial support level. It closed the expiry session on a strong note at 10,858.70 levels, up about 3.2 percent on a week-on-week basis.
The rally was primarily led by buying in Nifty IT and Media, which was up 4.2 percent and 4.6 percent, respectively, on a weekly basis. While Nifty Pharma and Metal were among the losers, down 3 percent and 2.9 percent, respectively, during the same period.
On the weekly price chart, the Nifty formed a long bullish candlestick pattern, coupled with the small-body bullish pattern on the daily price chart, indicating positive sentiment in the market.
Momentum indicators are signalling a positive divergence, with the weekly RSI at 51 levels up from its earlier level of 44, but MACD continued to trade below its signal line.
With the index breaching its important resistance of 10,750 on a closing basis, its next immediate resistance is seen at 10,883, followed by 10,930 levels. Support is seen at 10,490 levels.
With the Monetary Policy Committee policy meet due this week, coupled with exit poll results of the recently held state elections, the market is expected to witness buoyant momentum backed by positive expectations on both fronts.
Dovish commentary from the US Fed Chairman may lead to dollar inflow into emerging markets like India. However, uncertainties surrounding liquidity and corporate governance issues are likely to keep markets volatile on the back of profit booking.
We remain selective on opportunities and advise traders to use the rally to book profit. We maintain a trading level for the index at 10,950 levels on the upside and 10,720 levels on the downside on account of profit-booking.
Here is a list of top 3 stocks which could give 3-5% return in the next 1 month:
V-Guard Industries Ltd: Buy | Target: Rs 221 | Stop-Loss: Rs. 195 | Return 5%V-Guard Industries continued to trade with positive momentum for consecutive session after slipping below its 200-days moving average placed at 202 odd levels during the last three months.
During the last five sessions, it managed to break out from crucial resistance of 200-days EMA level on closing basis taking a strong support at Rs 180 odd levels.
The scrip also witnessed a substantial volume growth in the same period during the upward rally, and also formed a solid bullish candlestick pattern on its weekly price chart.
The momentum indicator outlined a positive divergence in price with its weekly RSI at 56 levels coupled with MACD making bullish crossover above its Signal-Line on daily basis. We have a buy recommendation for V-Guard Industries which is currently trading at Rs. 210.40
IndusInd Bank: Buy| Target: Rs 1714 | Stop-Loss: Rs 1595 | Return 3%
After making a significant correction from its 52-weeks high of Rs 2038 levels towards a low of 1330 odd levels on its six-month price chart, IndusInd bank made a strong rebound during the recent period to trade on an upward trajectory.
It remained strong throughout expiry week to breach upward from 50-days EMA placed at 1605 levels on closing basis, coupled with strong volume breakout on daily basis.
Taking a strong support at 1550-1520 odd levels which also forms its 20-days EMA, the scrip reversed trend to form long bullish candlestick pattern on its weekly price chart, signaling a buying sentiment at the current level.
Further, a daily momentum indicator favored the current trend with RSI at 65 levels coupled with MACD trading above its Single-Line. We have a BUY recommendation for IndusInd Bank which is currently trading at Rs 1660.55
Sun Pharmaceutical Ind: Sell| Target: Rs. 469 | Stop-Loss: Rs. 502| Downside: 3%
Sun Pharma remained under selling regime for the past three months despite its attempt to revive the fall but failed to sustain the momentum.
The scrip continued to consolidate from September month after clocking 52-week high of 679 levels, and further breached below from important support of 531 levels which coincide with its 200-days EMA place at 560 odd levels.
It currently trades below all the moving average level with 450-440 levels being a crucial support to look forward. The scrip formed long bearish candlestick pattern on its weekly price chart coupled with a small-body bearish candlestick on the daily chart, and thus indicating a sustained pressure on scrip on a short-term basis.
The weekly RSI stood at 36 levels indicating negative price divergent while MACD continues to trade below its Signal-Line. We have a SELL recommendation for Sun Pharma which is currently trading at Rs. 484.40
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.