NIFTY Index Chart Analysis
MARKETS FACE LACKLUSTRE INSTITUTIONAL PARTICIPATION
During the last fortnight, the market was seen moving higher and it met its measured move price target of 16,700. The last two days of price action suggests that the Nifty once again may consolidate for some time. The probable consolidation range could be of 16,300- 16,700. Monday's price action was limited within this range. Interestingly, in the last two trading sessions the Nifty witnessed one gap down and one gap up opening, but it did not sustain the opening lows or highs, which indicates that higher volatile moves are on the cards.
The Nifty formed a reveRs al candle i.e. shooting star near its all-time high with an added distribution day. Since the beginning of this financial year the volume trend is not encouraging. As mentioned in the previous columns, lower volume and lower volatility are the major concerns. The market is hitting new highs but volume is declining week by week. Over the past 16 months, the Nifty is up by 122 per cent. During this spectacular run, there were a few minor countertrend moves which were limited up to 8-9 per cent.
One of the longest corrections was from February 16 to April 22 at about 8.3 per cent. This clearly indicates that the index has not witnessed any major correction in the last 16 months. At the same time, several bearish patterns have failed to get confirmation. Not only that, but the negative divergence has also not shown any significant impact. During this period, the momentum has not been exuberant. These are the new characteristics of the bull phase. The most important concern at the current juncture is the underperformance of the broader market.
The Mid-Cap 100 and Small-Cap 100 indices have been declining for the last couple of weeks, wherein the Nifty Mid-Cap 100 has declined about 6 per cent from the highs and Nifty Small-Cap 100 has declined above 10 per cent from the highs. More importantly, Bank Nifty has failed to form a new high after February whereas Nifty is at a new high. At the same time, all the other sectoral indices, including pharmaceutical, are losing their relative momentum. Only IT and FMCG sectoRs continue to look promising.
These two sectoRs outperformed the broader market during the last week. These divergences and lack of leadeRs hip are the main concerns for now. In addition to this, the advance-decline ratio is also a big concern. Even in the S & P 500, the AD ratio is showing bearish possibilities for the global equity market. As of now the US Dollar index has broken out of a double bottom pattern, which signifies a potential bullish reveRs al signal. In the last two days it has been seen retracing a bit after four days of sharp movement. If the US Dollar index continues to move higher, the emerging markets may witness outflow from the FIIs. India has already been witnessing outflow of funds from FIIs for the past 2-3 months.
Institutional participation has been lacklustre for a similar period. When the US Dollar index started falling from March 2020 onwards, FIIs flow supported the market rally. But since February this year, the flow from FIIs turned negative and the US Dollar index has been on the rise. Another fact to be taken into account is that volatility is at its historically low level. It needs to be noted that phases of low volatility are often followed by a high volatile period. Hence, be attentive.
Furthermore, options in particular are not attractive to trade or for applying option strategies. The historical high PCR is also an indication that the market is at an intermediate high. As there is no major correction, the market could see a retracement of 61.8 per cent of the uptrend from the April 22 low. As mentioned above, the 16,700 level is likely to act as immediate resistance. A close above this level would lead to further momentum on the upside. The Nifty may test the zone of 17,000-17,263. On other hand, the zone of 16,150-16,300 is an important support on the downside and a close below this level would be a red flag for the markets.
STOCK RECOMMENDATIONS
HINDUSTAN UNILEVER LTD.............. BUY ...................... CMP Rs 2,634.15
BSE Code : 500696
Target 1 : Rs 3,044
Target 2 : Rs 3,300
Stoploss : Rs 2,450(CLS)
Hindustan Unilever Limited (HUL) is India’s largest fast moving consumer goods (FMCG) company with its products touching the lives of nine out of 10 households in the country. HUL works to create a better future every day. With over 85 yeaRs of presence in India, it has a number of brands in the FMCG sector. The company is a subsidiary of global FMCG leader Unilever which has a presence in 190 countries. Technically, the stock has closed at a new all-time high. It has broken the 18-week consolidation and entered Stage 2. The volume is above average. As the stock has consolidated for a long period, its relative price strength is flat and poor. The stock is trading 8 per cent above its 50 DMA and 12 per cent above the 200 DMA. Along with this, the stock is above the 50-weekly average and the 20-period Rs I is above the 60 level in a super bullish zone. The weekly ADX (22.81) is showing reasonable strength in the trend, and it is rising. The +DMI is above the -DMI and ADX. It is also trading above the Anchored VWAP. The EldeRs impulse system has given a buy signal on a weekly timeframe. The stock is meeting the criteria of a bullish set-up. With the FMCG sector in the leading quadrant, money is flowing into the sector. As a sector leader, HUL has an advantage. Accumulate this stock between Rs 2,600-2,645. Maintain stop loss at Rs 2,450. The short-term target is placed at Rs 3,044. The medium to long-term target is at Rs 3,300.
BRITANNIA INDUSTRIES LTD. ............. BUY ........... CMP Rs 3,864.65
BSE Code : 500825
Target 1 : Rs 4,272
Target 2 : Rs 4,490
Stoploss : Rs 3,630 (CLS)
Britannia Industries is one of India’s leading biscuits and food companies with over 100 yeaRs of legacy. It has the most trusted food brands in biscuits, bread, cakes and dairy segments. The company has sustained growth even during the pandemic and introduced new products. Technically, the stock is trading in the range of Rs 3,371-4,010 for the last 58 weeks. It moved above the prior pivot on the back of higher volume. It is above all the key long and short-term moving averages, and all the averages are trending up. It is trading 9.93 per cent above the 200 DMA and 7.96 per cent above the 50 DMA. It is even trading above the 50-weekly moving average. The ADX (29.29) shows the trend’s strength. The +DMI is much above the -DMI. The daily and weekly MACD is showing an increased bullish momentum. The Rs I is in the bullish zone. The stock tested and took support in the previous resistance areas, which is bullish. The stock has also broken out of a downward channel decisively with volume confirmation positive for the stock. In short, in all timeframes the stock has entered into a bullish zone. As long as the stock sustains above Rs 3,768 be with a positive bias. Accumulate this stock between Rs 3,800-3,900. Maintain stop loss at Rs 3,630. The short to medium-term target is placed at Rs 4,272. It may face resistance at around Rs 4,272. Above Rs 4,272 it can test Rs 4,490.
*LEGEND: • EMA - Exponential Moving Average. • MACD - Moving Average Convergence Divergence • RMI - Relative Momentum Index • ROC - Rate of Change • Rs I - Relative Strength Index
(Closing price as of Aug 23, 2021)
Disclaimer : Above recommendations are based on various technical parameteRs and any fundamental input has not been considered for the recommendations. Follow strict stop loss for the recommendation.