Broader market destruction continues, 10,850 becomes key support
Last week, one day ahead of the Union Budget, the recovery mode started in our market. After giving a good move of nearly 500 points in five days, the rally halted on the day of RBI Monetary policy. It was quite surprising to see massive sell-off on the following day, despite RBI Governor granting 25 basis points (bps) cut in repo rate and changing the stance to neutral. The selling aggravated in the last hour of the week to shave off decent portion of intra-week gains.
First half of the week gone by has been fantastic for benchmarks. In the process, Nifty managed to surpass its multi-month hurdle of 11,000. In this move, the broader market continued to underperform, but on Thursday, index consolidated and some early sign of revival were seen in many individual pockets. This ecstasy did not last long as we saw yet another bout of immense selling across the board on Friday to conclude the week with lot of ambiguity.
Going ahead, if market has to see a robust move, it would be very important for other pockets to participate as well. As far as levels are concerned, we are still in the relatively safer zone. Going ahead, 10,900 – 10,850 would be seen as a key support zone. Till the time Nifty remains above it, there is no reason to be worried. On the flipside, 11,041 followed by 11,118 are the levels to watch out for.
At this juncture, a prudent strategy would be to stay light and follow a stock-specific approach. One could switch on to the aggressive mode only after Nifty surpassing the 11,000 mark along with the broader market participation. In this scenario, a move towards 11,300 – 11,400 cannot be ruled out. Only a sustainable move below 10,850 would give a dent to the above mentioned optimistic scenarios.
Last Close: Rs 2,702.15
Justification: This stock has seen a gradual recovery in the last three months after undergoing a massive price correction in September. Last couple of weeks have been good for this stock and in this course of action; the stock went on to confirm a breakout from its recent congestion zone around Rs 2,650. In addition, the ‘RSI-Smoothened’ on daily chart has surpassed the threshold level of 70, which bodes well for the bulls. We recommend going long for a positional target of Rs 2,898 in the coming days. The stop loss can be placed at Rs 2,620.
Last Close: Rs 415.15
Justification – It may sound an extremely contradictory call but looking at recent developments, we are inclined to do so. Due to recent sharp sell-off, the stock prices entered deeply oversold territory. On Wednesday, we witnessed a V-shaped recovery from its multi-year falling trend line support area. In the process, the stock prices went on to form a ‘Bullish Hammer’ pattern around it. The said pattern has been confirmed on a closing basis and hence, we expect a good relief move in this counter. One can look to go long around for a target of Rs 468 in coming weeks. The stop loss can be placed at Rs 395.80.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.