Market outlook & two trading ideas by Sameet Chavan of Angel Broking

Last week, we started on a positive note as the bulls continued their upward journey from where it left the previous Friday. For the next couple of sessions, the benchmark index continued with its habit of making fresh record highs every day. In the process, Niftywent on to reach yet another milestone of 16,700. On this day itself, we witnessed mild profit booking and Nifty closed a tad below 16,600. Our markets were shut on Thursday due to trading holiday and during this time only, the global markets became nervous all of a sudden following US Federal Reserve policy minutes.

This certainly had a rub-off effect on us as markets resumed the trading on Friday with a decent downside gap. Fortunately, the damage was not as big as on the index as SGX Nifty was indicating at one point. Eventually, Nifty ended the week at 16,450 with a nominal weekly cut. 

Despite being a truncated week, we had a lot of action in the market especially in the last couple of sessions. Unfortunately, the overall development was not pleasant. Now, looking at the weekly close of the benchmark, one would say not much damage was done in spite of a lot of uncertainty across the globe. But if we meticulously observe the individual stocks outside IT and FMCG spaces, the brutal knocks are clearly visible. There has literally been an onslaught in many counters from the derivatives space as well, which is really heart-breaking for traders as they got trapped all of a sudden looking at the bright posturing of benchmark indices. Such things can be deceptive at elevated levels because some or the other heavyweight basket keeps the index higher and this time it was defensive names like IT and FMCG.

In our previous commentary, we had clearly mentioned how the so-called ‘Hunky Dory’ picture is not so good for the market and last week’s stock-specific destruction clearly validates this point. Now, the weekly chart of Nifty exhibits a ‘Shooting Star’ candle, which is an indication of some pause if the low of the candle is breached on a closing basis. For the coming week, the cluster of supports at 16,350 – 16,250 – 16,150 are to be observed closely. As of now, there is no indication of Nifty sliding below the lower range of this support zone. But you never know how global developments pan out. On the flip side, the real strength in Nifty is possible only after convincingly surpassing the band of 16,500 – 16,600. Also, the BANKNIFTY and the NIFTY MIDCAP 50 index are trading at make or break levels. Since this week is the monthly expiry week, it would be interesting to see how things unfold. Traders are advised to remain light for a while and the ideal strategy would be to look at the individual stocks than the benchmark index.

Stock recommendations:

NSE Scrip Code – BATA INDIA

View – Bullish

Last Close – Rs 1742.60

Justification – This counter has been a steady mover in the last couple of weeks, whilst the broader market was under tremendous stress all this while. During the week, we witnessed a breakout from recent hurdles and the volume activity has been quite decent to support the price action. Importantly, the weekly positioning is quite impressive of the stock and hence, we will not be surprised to see some outperformance if we witness any bounce back in individual pockets in the coming week. We recommend buying on a small decline for a short term target of Rs 1,845. The stop loss can be placed at Rs 1,675.

NSE Scrip Code – UNITED SPIRITS

View – Bullish

Last Close – Rs 703.90

Justification – The liquor space was quiet for the last couple of months but on Wednesday, all of a sudden we witnessed some vibrant moves in this basket. ‘United Spirits’ was consolidating around its support and it suddenly took off to confirm its highest level in the last 18 months. The massive bullish candle was accompanied by gargantuan volumes, indicating genuine buying interest in the counter. Although there was some mild profit booking seen on the following day, we recommend buying for a short term price target of Rs 764. The stop loss needs to be maintained at Rs 682.

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Discalimer: Sameet Chavan is Chief Analyst- Technical & Derivatives, Angel Broking. Views expressed are personal.