Stock picks by Sameet Chavan: Buy Cummins India, SBI Life Insurance

Recently, Cummins India's declining trend seems to have been arrested around the 750-mark, which coincided with the '89-EMA' on the daily chart

Nifty outlook

The massive correction in the US markets in the previous session had a continuation on Monday morning to haunt traders across the globe. As a result, our markets opened with more than a per cent cut to test the 15,500-mark. However, this was followed by a remarkable V-shaped recovery in the remaining part of the day. For the subsequent two sessions, markets consolidated at higher levels with no clear intent. However, towards the fag end of the week, the bulls were back with some strength to mark highest ever weekly close, a tad below 15,900.
 

In our previous weekly commentary, we had advocated some caution considering the formation of ‘Hanging Man’ pattern on weekly chart. To activate this, the prices should have slipped below the low i.e. 15,450 in this case. But, since it reversed from 15500, the pattern was not confirmed. Also, we had shared our observation on the placement of the NIFTY MIDCAP 50

index around some crucial levels. All these negative developments have not been completely negated yet; but the kind of up move we witnessed in BANKNIFTY on Friday’s session, the bulls seem to have upper hand here. Hence, banks become a deciding factor going ahead.

A follow-up move in the coming sessions would definitely push the Nifty towards its much awaited milestone of 16,000 and may even extend towards 16,200 later. Hence, it would be interesting to see how things pan out in the banking space.

As far as supports are concerned, the immediate levels are placed at 15,700 – 15,670, and the base is to be seen at 15,450 now. Till the time the market defends these important supports, the short-term trend remains bullish. But, having said that, we would still reiterate that one should avoid being complacent and it’s better to continue with the strategy of ‘one step at a time’. Because although it’s difficult to time it, whenever any rally overstretches without giving any meaningful correction, market tends to surprise anytime. So to be on the safer side, try to avoid aggressive leveraged positions overnight.

Stock recommendations:

NSE Scrip Code – CUMMINS IND

View – Bullish

Last Close – Rs. 857.95

Justification – This stock has been consolidating with small correction in between since the beginning of April. Recently, the declining trend seems to have been arrested around the 750 mark which coincided with the ’89-EMA’ on the daily chart. The stock prices rebounded well from this important support zone and now with Friday’s smart up move, we can see a configuration of bullish ‘Cup and Handle’ on daily time frame. Since it’s backed by more than average daily volumes, we recommend going long for a short term target of Rs.906. The stop-loss can be placed at Rs 823.

NSE Scrip Code – SBILIFE

View – Bullish

Last Close – Rs 1,007.15

Justification – All the life insurance companies are doing well since the last few months. In fact, they have been holding their ground firmly during the in-between corrective phases the broader market has been experiencing. Now, the stock prices seem to have cemented their position around 970 – 950 which is the earlier breakout point. During this week, its peer counters had a good move but SBI Life remained quiet. Now looking at Friday’s price action, we expect this stock to have do some catching-up to its peers. Thus, we recommend buying for a short term price target of Rs 1,058. The stop loss needs to be maintained at Rs 979.

Disclaimer: Sameet Chavan is Chief Analyst - Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.