NIFTY Index Chart Analysis Interim budget may clear the cloud of uncertainty

The Indian stock markets continued to remain under heavy cloud of uncertainty for the fifth consecutive week. The uncertainty is likely to clear in the coming weeks, as one of the pivotal economic event of the country unfolds on February 1, 2019, the interim budget for FY20. This consensus of the D-street is that the NDA government may come up with some populist moves specially for farmers. 

While the domestic markets remain unsure, the global equity markets have extended gains into the fourth straight week as the US and China trade negotiations between mid-level trade officials inched forward. Meanwhile, the crude oil prices settled with a minor loss last week as worries about global growth and energy demand continued to weigh on the commodity. 

Going ahead, the Q3FY19 results and the interim budget will continue to be the key themes for the coming days. That apart, the market is likely to take note of some microeconomic events like India’s fiscal deficit numbers, infrastructure output numbers, Nikkei Manufacturing PMI and auto sales numbers. On the global front, the outcomes of US Federal Reserve’s first monetary policy meet of 2019 and the next round of trade talk between the US and China are the major global events that will direct the global market in the short term. 

The NSE benchmark index Nifty has continued to fluctuate in a narrow range on the weekly scale with its range reduced further to 10700-10980. Also. on the monthly scale, January will be the third consecutive month where the move has remained inside October 2018’s monthly candle. The index has recently closed below the major moving averages, i.e. 50-day SMA, 100-day SMA and 200-day SMA, signaling that the bears have tightened their grip. 

The index has formed bearish candle on the weekly scale, which implies that the index continues to face profit-booking near the critical resistance levels. 

However, the 11000 mark remains an important psychological resistance for the index. On the weekly time frame, the 14-period RSI has recently given negative crossover and the fast stochastic is trading below the slow stochastic, which suggests that the bears are in a dominant position. The Average Direction Index (ADX) on the daily scale is quoting around 9.48, which suggests there is no strength in any directional momentum. In the coming days, the index is likely to give directional move upon unfolding of some key events. The zone of 10950- 10990 may continue to act as a major barrier for the index as multiple resistances are placed in that region. A decisive close above this zone would extend the pullback towards the level of 11090, while on the downside, crucial support is placed in the zone of 10650- 10600. A decisive close below this level would open the gate for further correction towards the level of 10330, which is the recent swing low. 

STOCK RECOMMENDATIONS 

HCLTECH .......... BUY ........... CMP Rs 988.10 

BSE Code : 532281
Target 1 .... Rs 1085
Target 2 ..... Rs 1100
Stoploss....Rs 920 (CLS) 

HCL Technologies Ltd is currently trading at Rs 988.10. Its 52-week high and low stand at Rs 1124.50/Rs 880 made on September 25, 2018 and June 5, 2018, respectively. After registering 52-week high, the stock witnessed correction. The correction was arrested near the long term trendline on the weekly time frame, which coincides with the long term 100-day SMA. Considering the weekly time frame, the stock had formed reversal Doji candle near trendline support as on weekend of January 11, 2019 and, thereby, it witnessed higher tops and higher bottoms. The weekly 14-period RSI took support around the level of 40 and, at present, it is trading above its 9-day average. The fast stochastic is trading above its slow stochastic, which suggests bullish bias. In the medium term, the trendline support of Rs 920 is likely to act as strong support and, on the upside, the stock is likely to head towards the level of Rs 1085, followed by 1100. We recommend a BUY with a stop loss of Rs 920 on a closing basis 

BATA INDIA ........... SELL ............ CMP Rs 1106.10 

BSE Code : 500043
Target 1 ..... Rs 1000
Target 2 ..... Rs 970
Stoploss....Rs 1180 (CLS) 

Bata India Ltd is currently trading at Rs 1106.10. Its 52-week high and low stand at Rs 1177/Rs 656.80 made on January 15, 2019 and February 6, 2018, respectively. After registering high of Rs 1115.75 in the month of August, the stock entered into corrective phase. The correction was halted near 50-week EMA and, thereafter, the stock has seen higher tops and higher bottoms However, considering the daily time frame, the stock has made a double top pattern, which suggests correction before another northward movement. At present, the stock has given breakdown of upward slopping trendline on the daily scale. The breakdown was supported by rising volumes. The 14-period daily RSI quoting at 42.90, which depicts negative momentum. The daily MACD stays bearish as it is trading below the zero line. Considering all the above factors, we expect the stock to touch the level of Rs 1000, followed by Rs 970, and the stop loss is suggested at the level of Rs 1180 on a closing basis. We recommend a SELL.