NIFTY Index Chart Analysis

More than the geopolitical tensions between North Korea and the US, the markets panicked due to the verbal slugfest between Donald Trump and Kim Jong-un, the latest one being North Korea's allegation that Trump had declared war against the country. However, the actual culprit of the free fall was an abrupt surgical strike announced by the country on Myanmar, which washed off major support levels. Further, Indian macroeconomic numbers precipitated the downfall. The fiscal stimulus panic is in the air where the consequences of decline in GDP growth to 5.7% in Q1FY18 still linger on in the economy. Furthermore, the economic growth is likely to be moving at a slower pace. Moreover, the fear of fiscal deficit overshooting the target for the current financial year is real as the deficit has increased to 28.5%, already reaching 92.4% of the full year target. 

The provisional add-ons to the weakness in the markets could be ahead of September F&O expiry. Moreover, RBI policy review and corporate earnings data are at the doorstep, which are spreading caution in the markets. 

The major Indian benchmark Nifty started profit-booking on the same day it hit all-time high levels at 10178/10179. Thereafter Nifty witnessed correction for five consecutive trading sessions, mostly supported with rising volumes. On September 26, Nifty hit just below the previous day’s low and recovered to close flat, which has formed a kind of double bottom pattern on the daily time frame. However, the recovery was a breather and Nifty nosedived yet again, breaching major supports at 9785, followed by 9740. 

In case Nifty attempts short covering at the current levels, we hold 9820-9890 as the immediate resistances, followed by 9945 in the form of a pullback, which is the 50% retracement level of the downward rally for the Nifty. If Nifty continues with the fall, we hold 9685 as the crucial support. 

An immediate bounce back to all-time high levels or beyond that is tough, but strong domestic cues at the start of October month followed by festive season may bring in some optimism in the markets. Hence, considering the medium-term time frame, we hold 10200-10300 as the resistances, followed by 10700. On the downside, 9685 followed by 9640 would act as crucial support level, as below that level Nifty would enter the negative trend on provisional basis.  Nevertheless, though it is a crucial period for traders and investors, stock-specific buying would help. Moreover, if Nifty surges to 10000-10040 and retreats, traders would do well to rather stay away and observe the move, rather than getting their stop losses hit before a bounce.

STOCK RECOMMENDATIONS

Considering the weekly time frame, the stock has witnessed inverse head & shoulders pattern in the making, which has a breakout at around 590-600 levels. The stock had corrected up to 61.8% of the prior upward rally and has attempted a bounce back since last two weeks. The bounce is supported by rising volumes and 14-period RSI positive crossover quoting at 60 on the daily time frame. 

Considering this, we recommend a Buy in the stock for a target of Rs560 followed by Rs578 and with a stop loss of Rs510.

UNITED SPIRITS LTD FUT LTD ... SELL .. CMP Rs2413
NSE Code : MCDOWELL-N Target 1 ..... Rs2390 | Target 2 ..... Rs2380 | Stoploss.... Rs2445 (CLS)

The stock of United Spirits is currently trading at  Rs2413. Its 52-week high and low stand at  Rs2782.75/ Rs1775 made on July 19, 2017 and November 22, 2016, respectively. 

Considering the daily time frame, the stock is trailing at its resistance-turned-support level, and hence, below Rs2420 the stock may correct further. 

Recently, the stock had witnessed a fall for four consecutive trading sessions after a reversal Doji on September 19. Thereafter, the stock took a day’s breather and has reversed yet again. The declining volumes and the 14-period RSI quoting at 35 suggests lack of upside momentum, for now. 

Considering this, we recommend a Sell in the stock below Rs2420 for a target of Rs2390 followed by  Rs2380 and for a stop loss of Rs2445