NIFTY Index Chart Analysis
The correction in the crude oil prices from the high of 2018 leading to some bounce in the rupee and the corporate earnings coming in line with expectations have resulted in a rebound in the Indian stock markets from their crucial support levels. Some stocks have witnessed tentative bottom-fishing, majorly in those stocks that have posted creditable quarterly performances. The oil prices dipped after Saudi Arabia assured uninterrupted supply despite its retaliation policy and the rise in the US inventories. Further, the exclusion of few countries including India, Japan and Korea from the likely sanctions by the US on imports from Iran may help reduce the prices which will result in rupee bounce-back further. Secondly, most of the Q2 results have been in line with expectations, but the companies have failed to perform on the margin and profitability front amid rising operating costs and high competition. The moderate domestic demand too has resulted in unsatisfactory topline performance.
Further, the YoY growth for many companies came in positive because the company performances were badly hit in Q2FY18 post the GST roll-out. Yet, hopes of revival in results and lower double-digit growth in the topline have helped the bulls withstand tremendous pressure from the bears on both domestic and world indices. The country’s jump by 23 places in ease of doing business to 77th rank came in as a silver lining to the otherwise pessimistic market conditions. This may release some pressure on the BJP government in the upcoming state elections followed by the Lok Sabha elections. The DIIs have been cushioning the markets all through, despite the huge ongoing sell-off by the FIIs. Apart from benchmarks, the broader market indices, specifically the Mid-cap index, has fared well during the period, outperforming the other benchmark indices. On the sectoral front, Realty led the market revival.
Our benchmark index Nifty took support around our mentioned crucial level of 10,000, hitting a low of 10004 on October 26. After a sharp fall for seven consecutive sessions on intra-day basis from 10710 to 10004 levels, Nifty has rebounded with a sharp rise of huge daily bullish candles on alternate days, with small bearish candles in the form of breathers. Nifty has a ‘V’ pattern in the making and would succeed if it breaches the major resistance at 10710 on a closing basis. Nifty has already passed the major retracement levels of that move. Meanwhile, it also filled the gap-down witnessed on October 19 from the low of 10436 level on October 17. Hence, in case Nifty continues with the current bounce, we hold 10675-10710, followed by 10825, as the immediate resistances, where 10675 is 38.2% retracement of the downward rally from the all-time high to 10004 and 10825 is the 200-day EMA level. The level of 10880 will act as further resistance, which is the 50% retracement level of the same rally. The volumes are relatively low but justifiable and oscillators have bounced back from the border of oversold zone to above 50. Yet Nifty seems to be in the short covering zone and still to start its fresh buying rally. All the aforesaid indicators signal further upside, but these have not confirmed any bullish reversal pattern or continuation of the momentum. Hence, in case Nifty retreats from here, we hold 10460-10375, followed by 10300-10230, as the crucial support levels. The zone of 10000-9950 will act as trend reversal for the Nifty.
STOCK RECOMMENDATIONS
UNITED BREWERIES ........................ BUY ................ CMP Rs.1255
BSE Code : 532478
Target 1 .... Rs.1363
Target 2 ..... Rs.1406
Stoploss....Rs.1150(CLS)
The stock of United Breweries is currently trading at Rs.1255. Its 52-week high and low stand at Rs.1464.20/ Rs. 908 made on September 28, 2018 and March 26, 2018, respectively, where 52-week high also acts as an all-time high. The stock has been trading in an upward sloping channel pattern since mid-October 2017. The stock gave a breakout of the channel during mid-August 2018 but witnessed a double top at Rs.1462-1464 on August 24 and September 28 and thereby gave a sharp fall up to its lower trendline level at Rs.1083. It bounced back but retested the trendline again on October 29. Recently, the stock has bounced back again and succeeded in giving major resistance breakout at Rs.1230 level. Meanwhile, the stock also breached its 100-day and 200-day EMA levels. The volumes are picking up and the 14-period RSI is quoting at 57, suggesting the start of momentum. On the weekly time frame, the stock had given multiple resistance breakout near Rs.1230 level and had witnessed a pull-back, followed by the current bounce. We recommend BUY.
KEC INTERNATIONAL ................ BUY ........................... CMP Rs.308
BSE Code : 532714
Target 1 ..... Rs.334
Target 2 ..... Rs.342
Stoploss....Rs. 283 (CLS)
The stock of KEC International is currently trading at Rs.308. Its 52-week high/low stand at Rs.442.60/ Rs.244.20, which were made as on April 19, 2018 and October 9, 2018, respectively. Considering the daily time frame, the stock was trading in a downward sloping channel pattern since March 20, 2018.
The stock hit its 52-week low which was near to the lower trendline support and formed a Doji pattern. The stock surged gradually and gave a channel pattern breakout at Rs.284 on October 31. The stock also breached its prior resistance at Rs.302.75 and is approaching its major resistance at Rs.318.50. On November 2, the stock broke its 100-day EMA level at Rs.308.50. The volumes are rising and the 14-period RSI is quoting at 65, suggesting some more upside in the coming sessions. Considering the monthly time frame, the stock has taken a support at 61.8% retracement of the prior upward rally from Rs.111 to Rs.442 level and bounced back in October itself. We recommend BUY.
(Closing price as of Nov 02, 2018)