A list of stocks to watch out for based on rotational aspect of the index for medium to long term.
Pushkaraj Sham Kanitkar
The Nifty closed at 9,108 and has largely remained sideways for the whole of the last week. This is despite the market still trading within a percent and a half from its all-time high of 9,218, created a few days back.
The market seems to be interestingly poised, even though it has remained on a lower step, within the high of 9,168 compared with 9,218 and low of 9,019 compared to 9,060 corresponding to the week passed by.
The level of 9,060 further gathers significance, as around those levels the market also enters the GAP that market created from close of 8,934 on March 10, 2017 to open of 9,092 on March 14, 2017.
While the market has remained within this ambit, there is a marked case of profit booking at higher levels, which has given rise to rotational movement within the index constituents especially the heavyweights. We maintain a cautious approach from here on as a welcome correction is not ruled out.
GEPL Capital lists out stocks to watch based on this rotational aspect of the index for medium to long term.
Tata Steel: BUY| Target Rs 575| Stop Loss 460| Return: 17 percent
The charts are showing a rational uptrend almost since a year, with intermediate bouts of profit booking. This has seen all the longer term moving averages like 50, 100 & 200-days moving averages too, remaining in a rational uptrend as well as positively aligned.
In the latest leg, the prices corrected from around Rs 500 to a level of around Rs 463, and after consolidation moved UP on pretty big delivered volume back to Rs 500.
In the process, a good amount of Put writing was seen at lower levels around the Rs 480-490 mark creating a good setup for an up move. On the flip side, expiry pressures may hold up the stock within the ambit of Rs 520 on the higher side, though a good move is expected past the expiry.
We feel prices would create space till around Rs 530 followed by a take at the 2-year high around the Rs 575 mark. On the lower side, the recent swing low of around Rs 460-465 will prove to be a good demand zone. One may place stops a bit below these levels on a closing basis.
Hindalco: BUY| Target Rs 225| Stop Loss Rs 175| Return: 13 percent
Hindalco has maintained in a rational uptrend that has seen the formation of higher top and higher bottoms right since February 2016.
In fact, the latest leg has seen Hindalco create fresh 52-week highs at Rs 202 just last to last week; which is also higher than the high of last 3-years placed around the Rs 198 mark.
Once again, the consolidation seems to be pretty strong with exponential delivered volumes being around twice the averages. We feel there could be a case of a sustained uptrend that could test the levels of around Rs 225 with an extension to all-time highs of Rs 248-250 created in 2011.
The stops may be placed around 175 on a closing basis, a bit below the intermediate bottom of 178 created in February 2017.
L&T: BUY| Target Rs 1,615-1,750| Return: 12 percent
The charts are showing a series of higher top and higher bottom formations since December 2016, after a sustained correction of 6 months spanning a move from around Rs 1,615 to Rs 1,300.
The current leg sprang up in the form of a gap-up from Rs 1,491 on March 10 to Rs 1,517 on March 14. This move has sustained very well after almost a month’s consolidation between Rs 1,446 and Rs 1,515.
This would in a way open the gates to the 52-week high at 1,615 followed by the distribution phase of 2014 around the Rs 1,750-1,800 mark.
RBL Bank: BUY| Target Rs 525-530| Stop Loss 475-485: Return 7 percent
The stock has remained a favorite for the neo-banks group, as after listing around the Rs 300 mark around 6 months back, the prices have risen in a classical higher top and higher bottom trajectory.
This has been prefixed by a good consolidation of 3 weeks till Rs 420 levels. A high volume up-move was further seen where prices went higher onto Rs 500 levels. We feel this has created space till Rs 525-530 levels on the higher side with little barriers in between, while the base remains etched around the Rs 475-485 mark.
Axis Bank: SELL| Target Rs 442-476| Stop Loss Rs 515| Return: 2-9 percent
Although the news doing the rounds of a possible merger with Kotak Bank seems to have supported the prices for around 2 months, the undertone seems to have remained pre- dominantly bearish.
It happens to be one of the very few stocks to be still trading below the long-term 200-DMA (Daily Moving Average). In fact, the recent move was cut short just near this resistance level of around the Rs 525 mark.
We feel the prices are back to their weak self and any rise from here on should be an opportunity to add to shorts or exit existing holdings.
The downsides till recent swing low at Rs 476 followed by the previous swing low placed at Rs 442 would open up. A stop may be placed a bit above the current 200-DMA placed at Rs 515 on a weekly closing basis.Disclaimer: The author is AVP - Technical Research at GEPL Capital. The views and investment tips expressed by 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.