Market plunges on panic selling, 10,925 to act as crucial support

NIFTY Index Chart Analysis 

We had talked of the bearish reversal in our previous issue and, accordingly, our benchmark index Nifty plunged sharply breaching all the crucial supports and hit below the 11,000-mark. A considerable bounce-back in the crude oil hitting multi-year peak and rupee pressurised to hover near its historic low levels reinforced the pessimistic environment in the markets. OPEC and allies like Russia, a major producer, have kept their production in check though none wanted the prices to go above USD 80/barrel as it would hurt the demand. Now all eyes are on the US sanctions on Iranian oil sales to cut production further at the start of November. Secondly, the prevailing US-China trade war concerns heightened, with Trump announcing his biggest ever blow of 10% tariffs on Chinese goods amounting to USD 200 billion annually dragged down the sentiments further in the Asian markets and India was not an exception to it. China too responded by slapping tariffs on US goods worth USD 60 billion.

On the domestic front, the much-awaited CPI, WPI and IIP data were encouraging, with the CPI and WPI cooling at 3.69% and 4.53% in August as against 4.17% and 5.09% in the previous month, respectively. However, the numbers were bigger than that of the same month last year and the expected rise in the inflation numbers amid peaking oil prices and the expected rise in food prices in the wake of below normal rains may provoke the RBI to maintain the tight money policy. The biggest recent blow to the markets was Goldman Sachs downgrading the Indian equities to overweight. 

The FIIs are selling and DIIs are not buying to make up the sell-off. Not just benchmark indices, but the broader markets too are falling at a greater speed. Few investors are exiting for profit-booking, while others are not getting a chance to enter as they fear catching the falling knife while trying to buy on dips.

 

Technically, Nifty has witnessed bearish reversal and the prices are falling, making lower tops and lower bottoms in the daily time frame. The impulses are sharp, while the upside corrections are in the form of breathers. Nifty breached our major support of 11390 and fell beyond our downside targets of 11300-11235. Not just that, Nifty also breached the 60% retracement at 11017 of the prior upward rally from 10557 to the peak. On the daily time frame, Nifty breached its 50-day and 100-day EMAs and also hit below 10925-10935 trend reversal zone, though not on a closing basis. However, the good volumes and oscillators still tilted southward cue to some more downside if 10925 is broken on a closing basis. Hence, we hold 10775-11605 as supports, followed by 10555, which will act as provisional trend reversal. Any bounce from the current levels can be considered as a breather or a corrective for now. In case of any short-covering, we hold 11075-11090 to act as resistances. Above these levels, we hold 11205, followed by 11310, as the major resistances. 

STOCK RECOMMENDATIONS 

HCL TECHNOLOGIES......... BUY..........CMP Rs 1112.45 


BSE Code : 532281 
Target 1 .. Rs 1175 
Target 2 ..... Rs 1220 
Stoploss....Rs 1050(CLS)


The stock of HCL Technologies is currently trading at Rs 1112.45. Its 52-week high and low stand at Rs 1106.60/Rs 825.10 made on April 23, 2018 and December 4, 2017, respectively. Considering the weekly time frame, the stock formed a prolonged rounding base pattern, where the stock breached its earlier record high for the first time in April 20 week after mid-March 2015. Considering the daily time frame, after hitting 52-week or all-time high, the stock tumbled sharply up to Rs 880 near its previous support and bounced back gradually making higher tops and higher bottoms. Recently on September 24, the stock breached consolidation of seven consecutive days at the 52-week high levels and the stock has almost reached its record high levels. It has witnessed volume built-up along with 14-period RSI positive crossover at 65 level, and currently quoting at 68. This suggests momentum and thereby holds potential for some more upside in the near term. We recommend a BUY. 

TATA MOTORS.......... SELL ............ CMP Rs 240.90 

BSE Code : 500570
Target 1 ..... Rs 220
Target 2 ..... Rs 215
Stoploss....Rs 262 (CLS) 


The stock of Tata Motors Ltd is currently trading at Rs 240.60. Its 52-week high/low stand at Rs 466.95/ Rs 229.05, which were made as on November 6, 2017 and September 21, 2018, respectively. The stock has been trading with lower tops and lower bottoms since January 2017 and since January 2018, the stock is trading below its 50, 100 and 200-day EMA levels. Since July, the stock was seen trading in a range of Rs 243 to Rs 277 levels and had attempted a breakout on September 7 where the 14-period RSI too rose from the over-sold zone to above 60 level. The stock had also attempted a 50-day EMA breakout, but witnessed a whipsaw and turned completely to trade below Rs 243 and hit a new 52-week or a multi-year low. The stock saw good volumes during its fall and oscillators too are tilted southwards. After a big fall on September 21, the stock bounced back forming a hammer-like pattern, but it could not sustain and retreated yet again on September 24. We recommend a SELL.

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