NIFTY Index Chart Analysis

Indices peaking with cautious baby steps, Nifty may hit 12000 or 11500 

Indian stock market bulls are on a shopping spree, buying a select few at a premium with quality assurance, while ignoring the cheaper ones. A handful of frontline index stocks have driven more than 95% of the key benchmark indices' rally to the record levels. Others are still cautious ahead of the dicey global situation and the uncertainty on the domestic front regarding state and general elections. Further, the rupee has hit the 70-mark to a dollar and has been one of the worst performing emerging market currencies in CY2018. Rupee may see some more downside amid increasing concerns over the current account deficit. Looking at the revival in the corporate earnings for Q1FY19, the FIIs have re-entered the markets after July but on a lesser scale as for them the US seems relatively better place to invest. Even DIIs have continued buying, but the pace has slowed down. Due to this, we are seeing major indices hitting their peak levels, keeping the momentum, but with very poor market breadth. Hence, despite peaking of the key benchmark indices, investors' portfolios are yet to recover from the losses.

The broader market indices have rallied from their 2018 bottoms, but with tremendous intra-day volatility. On the sectoral front, IT and Energy sectors are seen surging, outperforming the benchmark indices amid rising dollar and RIL's one-way climb. The Financial Services and Bank Nifty are trading flat at their peak levels. Pharma remained subdued, while Media and Auto are still inclined southward. The select few that have witnessed breakouts are Metal, PSU Banks, Infra and Realty, which one can bet on in the coming days.

Technically speaking, our benchmark index Nifty has breached our mentioned resistance at 11450-11495 and is trading consistently up, but with cautious baby steps. This is depicted by falling volumes despite rising prices and oscillators snailing in the overbought zone, suggesting lack of momentum to support an upsurge.
 
The current week is the eighth consecutive positive week on a closing basis in the 9-week rally with just one breather in July 20 week. The symmetric triangle pattern which we had talked of earlier, may hit the target of 11,800-11,840 in case it holds above 11,750 on a closing basis. The ultimate target would be the 12,000-mark if we see a monthly close above 11,840. In case of any reversal from the current levels, we hold supports at 11660-11550, which are 23.6% and 50% retracement levels of the upward rally from 11340 to 11760, followed by 11340 itself, which would act as the provisional trend reversal.

STOCK RECOMMENDATIONS

AU SMALL FINANCE BANK .......BUY .........CMP Rs.714.15

BSE Code : 540611 
TGT 1:Rs.760
TGT 2: Rs.775
SL Rs.660(CLS) 
The stock of AU Small Finance Bank is currently trading at Rs.720.50. Its 52-week high and low stand at Rs.746.95/ Rs.528.85 made on April 27, 2018 and September 25, 2017, respectively. After hitting its 52-week and all-time high at Rs.746.95, the stock saw three consecutive months of correction, but then it witnessed support at 61.8% of the rally from Rs.576.30 on a monthly closing basis. Considering the daily time frame, the stock is seen trading in a kind of ascending triangle pattern since its listing on July 10, 2017, with slightly advancing upper trendline from Rs.720 to Rs.740 levels. Every higher bottom in the triangle is represented by narrowing rounding base patterns. Recently, the stock broke out of the rounding base pattern within the triangle at Rs.705 level on August 27 with the 14-period RSI quoting at 68 suggesting upside momentum. Further, the stock holds its next point of the upper trendline around Rs.760 level, breaking its all-time high. We suggest a BUY.

RURAL ELECTRIFICATION CORP .........Buy.........CMP Rs. 114.75

BSE Code : 532955 
TGT 1:Rs.122
TGT 2: Rs.128
SL Rs.103.50 (CLS) 

The stock of REC Ltd is currently trading at Rs.119.45. Its 52-week high/low stand at Rs.183.95/Rs.89.10, which were made as on November 3, 2017 and July 23, 2018, respectively. The stock is seen falling, hitting lower tops and lower bottoms since mid-May 2017 with which it has formed a kind of downward sloping channel pattern on the daily time frame. The stock hit a hammer pattern on the day it hit 52-week low, supported by rising volumes and 14-period RSI positive crossover just above the oversold zone. Thereby, it gave a sharp upside up to Rs.118.45, i.e., near to its first major resistance of Rs.119-122. The stock witnessed slight correction up to 38.2% retracement of the prior upward rally, which lasted for around seven trading sessions. Thereafter, it witnessed a 3-day consolidation after a slight bounce. On August 27, 2018, the stock gave a strong bullish candle, breaching its resistance at Rs.119.15 on a closing basis and a channel breakout at Rs.114.50 with volume spurt and the 14-period RSI positive crossover at 53 and quoting at 63. We suggest a BUY.