DSIJ Mindshare

Nifty Index Chart Analysis

The BJP win in UP with 312 seats out of 403, outshining the exit polls, made the index charts skyrocket on Tuesday, March 14, the first trading session after the results were out on Saturday, March 11. The major benchmark index, Nifty, witnessed a gap-up opening, making a new all-time high at 9122 levels on an intraday basis.

To add to it, the Indian IIP data that rose 2.7% in January as against contraction of factory output by 0.1% in December, thereby washing off the demonetisation impact, supported the optimism. Moreover, the forex reserves too surged by $1.2 billion to $ 364 billion, as on February 17, driven by a pickup in domestic markets and a stable Indian currency.

All-in-all it’s a new breakout for the markets and we expect the positive rally to continue with smaller correctives in between owing to the high WPI data that rose 6.55% in February, its highest level since November 2013. We also have CPI data in plate that may direct the markets in coming sessions. Considering the daily time frame, Nifty had taken a prolonged breather at the peak levels of 8980-8990, after hitting its 52-week high at 8969 levels, quoted during September 2016.

Nifty has successfully broken the crucial resistance levels and is ready for a new rally. Its notably a rounding bottom breakout after the markets were badly hit due to the demonetisation effect.Considering the weekly time frame, a demonetisation correction was just a 50% retracement level of the prior up move in the Nifty.

Subsequently, Nifty recently witnessed a cup and handle breakout, though in the positive trend. Going forward, we may see Nifty correcting for a while upto 8990-8975 to fill the gap either on an immediate basis or after some more upside. This may act as a pullback for another positive rally. 

In case the Nifty doesn’t take any support at the said resistance turned support level, we may see some more downside upto levels of 8860 followed by 8785 levels. On the contrary, if the rally continues uninterrupted, then major resistance is likely to come in at levels of 9250.

For now we hold, 9400 as the medium term target. However, the focus of the market will now shift to Fed rate hike related action. A 25 bps rate cut has already been factored into the price. Markets will be looking at the trajectory and pace of rate hikes. 

Summing it up, we see that a positive trend will continue in the markets with small correction at the beginning itself or after a while, ahead of the corporate earnings' season and GST implementation. However, volatility will continue to persist.

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STOCK RECOMMENDATIONS

WOCKHARDT ... BUY ... CMP Rs. 731

BSE Code : 532300 | Target 1 ..... Rs.800 | Target 2 ..... Rs.855 | Stoploss....Rs. 676 (CLS)

The stock of Wockhardt is currently trading at Rs.731. Its 52-week high/low stand at Rs.1129 / Rs.627, which were quoted as on July 21, 2016 and December 27, 2016. Considering the daily time frame, the stock has been trading with lower tops and lower bottoms since April 2015, but witnessed a consolidation at the bottom, suggesting a provisional bottom fishing. 

Recently the stock gave a multiple resistance breakout at nearly 727 levels along with a pullback. Moreover, the stock price has just given a positive crossover as regards its 50-days EMA level of 709, and is trailing near its 100-days EMA at the 733 level. The 14-period RSI is quoting at 56, and a one above 60 would give a good momentum.

Considering this, we suggest a Buy in the stock at CMP to 731 for a target of Rs.800 (its 200-days EMA resistance level) followed by Rs.855 with a strict stop loss of Rs.676.

INDIA NIPPON ELECTRICALS ... BUY ... CMP Rs. 528

BSE Code : 532240 | Target 1 ..... Rs.580 | Target 2 ..... Rs.620 | Stoploss....Rs. 475 (CLS)

The stock of India Nippon Electricals is currently trading at Rs.528. Its 52 week high and low stand at Rs.694.8/ Rs.357.2 made on October 25, 2016 and March 28, 2016. Considering the daily time frame, the stock is seen taking its major support near 200-days EMA level of 498, at 502 levels, after falling almost 20%.

The 14-period RSI is quoting at 38, wherein it has bounced back after hitting the oversold zone of 30. Considering the weekly time frame, the stock had given a multiple resistance breakout at 500 levels; and currently the stock witnessed resistance turned support there. 

We expect a bounce back from here and hence we suggest a Buy at CMP to 528 for a target of Rs.580 followed by medium term target of Rs.620, above which the stock will see a trend reversal. We suggest a strict stop loss of Rs.475 to be followed.

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