NIFTY Index Chart Analysis

Positive economic data boosted the sentiment in the domestic market and lifted key benchmark indices to a fresh all-time. In a six-day week (Saturday market was functional last week), the index took support again at a 10-week average. The recovery with a massive volume on Thursday and Friday indicates that the price has strength and renewed buying interest. The Large-Cap heavyweight stocks L & T, ICICI Bank, Tata Steel and Reliance Industries, and pharmaceutical and IT stocks powered the massive rise in volume. The index closed above the prior week’s high and sustained above the breakout level.

It has formed an outside bar, which is positive. The 10-week average has given support four times in the last six weeks. The important character of the current rally since the October 2023 low is that it never closed below the prior week’s low. This six-week ascending base breakout can be considered as the first Stage 2 base breakout. If it closes below the previous week’s low, it will give a confirmation for the reversal. The current week’s low (21,860) is equal to the 10-week average (21,920). A daily close below the prior day’s low will be the first sign of weakness for the short-term.

The earlier mentioned target of 22,231 was achieved, which is a 100 per cent extension of the prior swings. In any case, if the rally continues, the next target is 22,780. The reason to be bullish is that the daily RSI (63.22) has negated the bearish divergence by closing above the prior swing high and entering into a strong bullish zone. The daily MACD also has given a fresh bullish signal. However, some concerns still remain. Barring two days, the overall volume trend is declining. The higher volume in declining days is a big concern.

At the same time, the daily and weekly trading ranges have increased with volatility. Generally, this is a Stage 3 distribution character. The weird fact is that the distribution day count has reduced to just two. Expect more volatility to come. In 10 days, the general elections schedule will be announced. Despite the Nifty and some sectors and segments making new highs, the consolidation with higher lows will continue for some more time. The current price structure does not give high conviction in building a fresh portfolio.

It is not the trend to chase; it is to be followed. The runaway rallies may not happen from now. It is mandatory to protect the profits and pay attention to risk management. As mentioned above, the decline will be very sharp, where stop losses will be triggered. Focus on the pharmaceutical, IT and underperforming large-caps. Watch the sector rotation focus on high relative strength and momentum stocks.

Leap Year Phobia
The fear of the January-March quarter topping is not yet over. The major tops have occurred this quarter – 16 out of the last 21 years. A majority of them are leap years. The BSE Sensex 1992 (-56.45 per cent), 1996 (-34.33 per cent), 2000 (-57.81 per cent), 2004 (-32.36 per cent), 2008 (-63.70 per cent), and 2020 (-39.35 per cent) are leap years. In 2106, the bottom was made in February after a decline of 25.08 per cent. All these leap years have witnessed scams, crises and collapses, such as the Harshad Metha scam, the urea scam, the dotcom bubble burst, the Ketan Parekh scam, the world economic crisis, and the pandemic.

We are in another leap year i.e. 2024 and the first quarter. The next month is critical for the market before the event risks (elections in India and the US). The last two months of price actions are not convincing to be strongly bullish, though it is making new highs. Divergences, low-volume advancing days, and high-volume declines are the worrying factors for now. Though no weakness is visible, it is better to be cautious.

STOCK RECOMMENDATIONS

MANGALAM CEMENT LIMITED .................... BUY ................ CMP ₹780.20
BSE Code : 502157
Target 1 .... ₹880 
Target 2 ..... ₹940 
Stoploss....₹728 (CLS)

Mangalam Cement Limited is a B K Birla Group company that produces cement in 43 grades, 53 grades and Portland Pozzolana Cement (PPC) under the brand name ‘Birla Uttam’. The company has recently expanded its capacity from 2.0 MTPA to 3.25 MTPA, upgrading its Kiln I capacity by 0.5 MTPA in 2013 and establishing a new cement mill of 1.25 MTPA in 2014. It has set up two captive thermal power plants of 17.5 MW each. Apart from this, the company also owns 13 wind mills at Jaisalmer, Rajasthan with a capacity of 13.65 MW generation per day and a waste heat recovery plant with 11 MW capacity. Technically, the stock has broken out of a nine-week, Stage 2 flat base. The volumes were above average and show a fresh buying interest. The 10-week average is acting as strong support on a weekly closing basis. Currently, it is trading 11.92 per cent above the 50 DMA and 70.99 per cent above the 200 DMA. All the long-term and short-term moving averages are in an uptrend in an ascending order. Its Relative Strength line is at a new high and shows outperformance compared to the broader market. The weekly RSI and MACD are showing a strong bullish momentum. As the stock is trading at a new high, it has cleared all the resistances. The Elder’s impulse system has formed a strong bullish bar. The Stochastic RSI has given a fresh, bullish signal. It has also closed above the 23.6 per cent extension level of the prior swing. In short, the stock has registered a bullish breakout. Buy this stock above the ₹785-800 zone. Maintain a stop loss at ₹728. The short-term and medium-term target is placed in the zone of ₹880-940.
 

V-GUARD INDUSTRIES .......................... BUY ..................... CMP ₹342.35
BSE Code : 532953
Target 1 ..... ₹386 
Target 2 .... ₹415 
Stoploss....₹306 (CLS)

V-Guard Industries Limited manufactures and markets voltage stabilisers. The company has a strong brand name and has aggressively diversified to become a multi-product company catering to the light electrical sector, manufacturing voltage stabilisers, digital UPS systems and batteries, pumps, house wiring cables, switch gears, modular switches, electric water heaters, fans, solar water heaters, air coolers and various kitchen appliances. The stock has broken out of a 28-week Stage 2 consolidation. The consolidation depth is 16.12 per cent. For the last six weeks, it has been recording a massive volume, which shows renewed buying interest. The Relative Strength line is rising. The stock is at an all-time high and has cleared all resistances while trading above all the key long-term and short-term averages. It is 14.51 per cent above the 50 DMA and 18.73 per cent above the 200 DMA. The Daryl Guppy GAMMA indicator shows multiple averages in an uptrend and in an ascending order. The weekly MACD shows that a strong bullish momentum is building up. The RSI is in the strong bullish zone. The Elder’s impulse system has formed a strong bullish bar. Currently, the stock is trading above the 61.8 per cent extension level of the prior swings. Before the 28-week consolidation, it broke the 108-week cup and handle pattern, which has a depth of 57.46 per cent. It met over 50 per cent of the target. The current consolidation breakout reassures that the target may be achieved. In short, the stock has registered a strong bullish breakout. Buy this stock in the ₹334-350 zone. Maintain a stop loss at ₹306. The short-term to medium-term targets are at ₹386 to ₹415.

*LEGEND: • EMA - Exponential Moving Average. • MACD - Moving Average Convergence Divergence • RMI - Relative Momentum Index • ROC - Rate of Change • RSI - Relative Strength Index 

(Closing price as of March 5, 2024) 

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