Nifty Outlook and trading ideas by CapitalVia: Buy Tech Mahindra, HCL Tech

Technical Calls by Gaurav Garg, Head of Research at CapitalVia Global Research Limited- Investment Advisor

Markets ends lower after witnessing major profit booking on weaker global cues: Closes below 11,500  
 

Markets witnessed profit booking on Wednesday after Nifty rallied more than 10 per cent in the last three trading sessions after government’s big relaxation on slashing corporate tax. The index, however, failed to hold the 11,500 level and closed at 11,440.20, shedding 148 points. Apart from IT, all the indices closed in the red. Nifty Bank closed at 29,586.05 i.e., 503.62 points lower from the previous day’s closing.
 

As per option data for the next week, 11,500 level will remain critical as highest put and call OI stands here. Put unwinding is evident on strikes ranging from 11,500 to 11,600 which shows weakening of support at 11,500. Call writing at 11,500 shows Nifty to face stiff resistance. Traders should continue keeping a positive bias for markets as 200-day and 50-day EMA stands in the zones of 11,250 and put OI at 11,400 will act as major support, but we can expect more profit booking if 11,400 level is breached.

We can see a big momentum in IT stocks.

Stock recommendation:

Buy HCL Tech: Above Rs 1,064.50
 

Target:  Rs 1,122
 

Stop loss:  Rs 1,017
 

The stock is trading in the channel, coupled with it is a movement in the stock inclined to the lower zones of it. Resistance breakout is expected from the levels of 1064.50. The stock is making a resistance breakout in daily charts and is trading above its 50-day EMA and a breakout from here might result in good upside momentum. Considering the technical evidence, we recommend buying the stock above Rs 1,064.50 for the target of Rs 1,122, keeping a stop loss at Rs 1,017 on closing basis.
 

Buy Tech Mahindra: Above Rs 710
 

Target: Rs 733
 

Stop loss: Rs 694
 

The stock is currently trading above all important moving averages. After consolidating in a narrow range, the stock has given a breakout from the trendline from 710 levels and further strength from the levels of 710 will lead to a bullish movement. We recommend buying the stock at Rs 710 for the target of Rs 733, keeping a stop loss at Rs 694 on closing basis.

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Disclaimer: The analyst does not hold position in any of the stocks mentioned above.