Nifty defends its support, but ends well below the 12,000-mark
The week started on a positive note as the Nifty50 tested the 12,100-mark on the first trading session. Post a mid-week holiday; traders were awaiting the outcome of the RBI’s monetary policy meet on Thursday. The RBI announced a rate cut of 25 basis points (bps) in repo rate which was in line with expectations of majority of markets participants. However, despite this, the broader markets led by the banking space witnessed a sharp sell-off and Nifty ended the week below the 11,900 mark.
Post the election results outcome, the Nifty has crossed the 12,000-mark a couple of times but has been unable to sustain above the same. During the week, the index once again witnessed correction to drag the index well below the 12,000 level. On the lower time frame chart, the index has breached below the support of a ‘Rising Wedge’ pattern and such scenarios usually lead to a short-term corrective phase.
In Friday’s session, the index tested its 20-DEMA’support of 11,770 and recovered from the lows. Thus, 11,770 would be the crucial support to watch out for in the coming week and if the same is breached, then the index should continue to correct towards 11,700-11,615.
On the flipside, the index is likely to face resistance around 11,940-11,980 on pullback moves. Overall, we expect the index to consolidate within the above mentioned boundaries in near term. Having said that, one should keep in mind that the higher degree trend continues to be positive and this is just a corrective phase within an uptrend. Hence, positional traders should look to accumulate stocks when the index approaches the mentioned support range.
Amongst the sectoral indices, the PSU banks and the pharma counters were the biggest losers during the week. Traders are advised to take a stock-specific approach for the coming week and trade with a proper exit strategy.
NSE Code – Voltas
Last Close: Rs 617.20
Justification – Post the announcement of its quarterly results, the stock has formed a support base around its ‘200-DMA’. After consolidating above the support for a couple of weeks, it witnessed buying momentum on Friday supported by good volumes which is a positive sign. Hence, we expect the stock to continue its upmove in near term. Thus, we recommend buying the stock on dips around Rs 611 for a target of Rs 665 and the stop loss should be fixed at Rs 580.
2. NSE Code – Rural Electrification Corporation (REC)
Last Close: Rs 151.70
Justification – In this calendar year, the stock has witnessed formation of a ‘Higher Top Higher Bottom’ structure. Post the recent correction from its high during April, it has formed a support base around its ’89 EMA’ and has again resumed its uptrend. As of now, there are no signs of reversal and hence, we expect the momentum to continue in near term. Thus, we recommend buying at current levels for a target of Rs 165 and the stop loss should be fixed at Rs 143.
Disclaimer: The analyst may have positions in any or all the stocks mentioned above.