We have seen a spectacular comeback by the bulls after the recent hiccup towards 10,800. From the next day onwards, the market just took off with the help of a few heavyweight themes. Initially, it was the IT space that took the charge and lifted markets higher from the critical levels along with some participation from the banking space. In fact, the momentum kept accelerating in the week gone by; courtesy to some excellent news flow in the IT giant, TCS to lift the overall sentiments for other peers as well. In addition to this, HDFC twins joined the party and had stellar moves throughout the week. Any robust rally in the market is incomplete without the contribution of the banking space. On Friday, post the RBI policy, banking stocks attracted tremendous buying interest to eventually end the week at a new seven-month high for Nifty, above the 11,900-mark.
In the last couple of weeks’ rally, global markets played the major part as we are seeing some gravity defying moves despite some intermittent uncertainty. Initially, in our recovery mode, we were a bit skeptical, but in the first half of the week, we had to admit the miss and eventually started participating in the move. The way Nifty surpassed the 31st August high of 11,794 with some authority and is now within the kissing distance of 12,000, the positivity is likely to extend further. Importantly, the banking space which was following the benchmark in the entire recovery finally showed some dominance on Friday. This factor is very much in favor of the bulls, which may provide impetus for the extended rally. Now, the only missing factor is the participation from the broader market. If we look at the Nifty Midcap index in the last 7-8 sessions, they remained muted throughout and only a handful of heavyweight themes lifted the market higher. Hence, if Midcap index breaks out from recent congestion, it will be then considered as a healthy rally. Let see how things pan out in the next couple of sessions.
Now as far as levels are concerned, the base has shifted higher and the previous resistance area of 11,700 – 11,450 should now be treated as a strong support. On the flipside, we are very much close to the psychological mark of 12,000. The moment it’s taken out, we may see a steady move towards 12,200 – 12,400 levels. Since, the banking index is back to 200-day SMA on the daily chart and the way it closed with complete gush in the space, a move beyond 24,000 would provide strong support to the benchmark index. However, we would like to highlight that since the move is extremely swift, anytime we can see some intraday profit booking and hence, one needs to position accordingly and be very fussy in stock selection.
NSE Scrip Code – SBI
View – Bullish
Last Close – Rs. 198.30
Justification – On Friday, we had a stupendous move in the banking conglomerates and the most underperforming PSU banking space, too, participated aggressively in it. ‘SBI’ being the giant and trusted PSB of the lot has managed to break out after a long consolidation. Due to tail end surge, stock prices managed to traverse the ’89-EMA’ on daily chart with sizable volumes. In addition, we can witness a positive crossover in the combination of ‘5 & 20 EMA’; indicates a trended move in the forthcoming week. We recommend going long for a target of Rs.208 - 212 in coming days. The stop loss can be placed at Rs.192.
NSE Scrip Code – UBL
View – Bullish
Last Close – Rs. 990.55
Justification – As we stepped into an ‘Unlock 5.0’, government eased out lot of restrictions on restaurants and bars. Hence, the liquor stocks saw some buying traction post this development. Recently, UBL had undergone some selling over the past few weeks and after a brief pause, we witnessed a sudden spike in stock prices. If we look at the volume activity, we are seeing a decent rise, providing credence to the move. This may not be the complete trend reversal but at least we can see a short term bounce in the stock. Hence, we recommend going long for a target of Rs.1,035 in coming days. The stop loss can be placed at Rs.964
NSE Scrip Code – GRASIM
View – Bearish
Last Close – Rs. 745.10
Justification – In the last couple of weeks, the entire Cement space had a stellar move and ‘GRASIM’ being the holding company of cement giant ‘Ultratech Cement’, did not move to the tune of it. This sluggishness finally resulted in profit booking on Friday and despite benchmark hitting new seven-month high, this stock had a weak close. The daily chart now resembles a ‘Hanging Man’ pattern (formed on Thursday), which got confirmed on a closing basis as well. Looking at these observations, we expect the stock to underperform and witness further profit booking in the forthcoming week. Hence, momentum traders can look to sell on a bounce around 752-755 for a target of Rs.715 in coming days. The strict stop loss can be placed at Rs.773.
Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking. The analyst may have positions in one or more stocks. Views are personal.