Index trend and stocks in action on August 03, 2020

The bulls were seen cruising on the D-Street for the past six weeks, breaching one resistance after the other. It finally halted its northward journey on back of worries about credit risk in Indian banks, lethargic global cues and profit booking in index bellwether like Reliance Industries and HDFC twins. This resulted in Nifty breaking its six weeks winning streak, ending the week with a loss of 1.08 per cent to settle below 11,100 level. On the other hand, broader indices seem to do much better as Nifty Mid-cap skidded 0.37 per cent and Nifty Small-cap ascended by 0.42 per cent.

In the past week, Nifty had one positive and four negative trading sessions. On the weekly charts, Nifty formed a small red body candlestick pattern that resembles to closing price reversal pattern. This is because, the price ended near to week’s low and below the prior week’s closing price. So, is it suggesting a temporary pause or a trend reversal? Let’s dive deeper and find out.

Technically, Nifty mostly consolidated within the previous week's range and closed at the lower end of the range. Though it has breached the rising wedge support, the crucial support of 11,058 is still intact on a closing basis. Among all the swing highs from March lows, the current swing high is in the form of a box. Having said that, Nifty is spending quite a bit of time to form a new swing. Further, for past few weeks the 20-Day Exponential Moving Average (EMA) is acting as a support.

During the last week, three out of five trading sessions witnessed Nifty opening at high or a gap up and closing near the lower end of day’s range. Also, in the last two trading sessions of the week, Nifty closed below its previous bar’s low. This price structure depicts nothing but a distribution. As volumes are diminishing, the addition of distribution days is limited to one day. The distribution is observed mainly in the large-caps.

In the last trading session of the week, Nifty breached its crucial support level of 11,058 on intraday basis, but managed to hold it on closing basis. With this, Nifty filled the gap created on July 21, 2020. Going forward, the immediate support for Nifty is placed at 10,952 to 11,058 levels as the last two weeks’ low and the 20-DMA is placed in this zone. Further, the breach of this support zone would lead Nifty towards its 200-DMA placed at 10,860 level. On the brighter side, the first sign of strength would be witnessed if Nifty closes above the prior bar’s high and later it moves above 11,377 mark with a faster retracement.

Majority of the indicators have shown negative divergences indicating a bearish outlook. The 14-period Relative Strength Index (RSI) is hovering around 60 mark which is its ‘make or break’ level. Further, the Positive Directional Indicator (+DI) line is sloping downwards at its prior swing low, suggesting the weakening of positive strength in the trend.

Said that, the readers are advised to avoid taking aggressive long positions. On the flipside, to initiate bearish positions allow Nifty to close below 10,950 level for bearish confirmation.

HDFC: In the month of July 2020, individual loan disbursements were 81 per cent of the individual loans disbursed in the corresponding month of the previous year i.e. July 2019. Individual disbursements in the month of July 2020 grew 18 per cent over June 2020. Individual loans under Moratorium 2 accounted for 16.6 per cent of the individual loan portfolio on assets under management basis. Meanwhile, 22.4 per cent of the total loans under management opted for Moratorium 2.

Hero MotoCorp: Hero MotoCorp sold 5,14,509 units of motorcycles and scooters in July 2020. In keeping with its vision of ‘be the future of mobility’, Hero MotoCorp made an additional investment of Rs 84 crore (US$ 11 million) in Ather Energy, taking up its shareholding in the company to 34.58 per cent, up from 31.27 per cent. Hero MotoCorp has been a part of Ather’s growth story since 2016, when it first invested as a part of Series B funding.

Ashok Leyland: The company reported its sales figure for the month of July 2020. The company has reported a 56 per cent YoY drop in sales during July 2020, which stood at 4,775 units as against 10,926 units in July 2019.

Escorts: Escorts Agri Machinery volume grew by 9.5 per cent YoY in July 2020. The domestic tractor sales in July 2020 stood at 4,953 tractors, registering a growth of 9.9 per cent against 4,505 tractors in July 2019.

Sun Pharmaceutical Industries: The company’s subsidiary acquired all the shares of Aquinox Pharmaceuticals (Canada) Inc. on July 31, 2020 by making a payment of USD $8.2 million after meeting all the requirements.

Mahindra and Mahindra: The company’s overall automotive sales (domestic and exports) stood at 25,678 vehicles in July 2020, compared to 40,142 vehicles during July 2019. Mahindra’s farm equipment sector sold 24,463 units in India during July 2020, witnesses a growth of 28 per cent YoY.

Maruti Suzuki India Limited: The company posted total sales of 108,064 units in July 2020. This is a growth of 88.2 per cent over June 2020 and a fall of 1.1 per cent over July 2019.

Eicher Motors: The company announced the sales figures for motorcyles for the month of July 2020. The company has sold 40,334 motorcyles during July 2020, as compared to 54,185 units in July 2019, a drop of 26 per cent YoY.

Cadila Healthcare: Zydus Cadila receives a tentative approval from USFDA for Carbidopa and Levodopa extended-release capsules. This medication is used to treat the symptoms of Parkinson's disease (such as shakiness, stiffness, difficulty moving) or Parkinson-like conditions. The drug will be manufactured at the group’s formulation manufacturing facility at SEZ, Ahmedabad.