Nifty trend for Monday and stocks in news: IndusInd Bank, Dr Reddys Laboratories, Cadila Healthcare, Can Fin Homes, Aurobindo Pharma, Dwarikesh Sugar

As kids, we have all heard this quote, ‘one bad fish can spoil the whole pond’. Similarly, on the D-Street, one big fall on Thursday led to a negative close for Nifty on a weekly basis. For the week gone by, Nifty lost 1.27 per cent, while Nifty Mid-cap and Small-cap lost 1.79 per cent and 0.63 per cent, respectively.

The fall on Thursday resembles the fall that was seen on August 31. After a sharp fall of August 31, we saw the index witnessing a pullback that lasted up to the 50 per cent retracement (mid-point) of the big bearish bar of August 31.

On Friday, the index managed to hold above the lows of Thursday and as per the most important assumption in technical analysis that history repeats itself, we could see the current pullback rally continue its pullback up to the mid-point of the big bearish candle of Thursday.

On Friday, Nifty formed a small-bodied bullish candle, while on the weekly chart; there was a formation of a bearish candle. One interesting observation was made on Friday i.e. the broader indices outperformed the headline indices with Nifty Mid-cap and Small-cap advancing 1.13 per cent and 1.39 per cent, respectively. So, this is hinting that after a brief phase of underperformance by the broader indices, it’s showtime for the broader indices.

Let us analyse the chart of Nifty Mid-cap and Nifty Small-cap. The former rallied almost 8 per cent in just seven trading sessions from its September low. Thereafter, it entered into a corrective phase and the index corrected almost 61.8 per cent as well as it filled the majority of the gap of September 28. Further, the index formed a hammer-like pattern on Friday. So, the formation of a hammer around the gap area supports and near about 61.8 per cent, it reinforces the credibility of the support. Adding to the chorus is the slower pace of retracement i.e. Mid-cap index rallied almost 8 per cent and the current corrective decline as mentioned, retraced nearly 61.8 per cent of the recent upmove, and this retracement is witnessed in over seven trading sessions; so, this is a slower pace retracement. Amidst these bullish factors, there is certain evidence that indicates that the upmove is not of significant magnitude as the zone of 17,450-17,550 is a strong supply zone. Further, the range shift is seen on RSI on the weekly chart after falling below the 60-mark and in the recent move, the index has failed to cross above the 60-mark and changed its trajectory in the downward direction.

Nifty Small-cap index too formed a hammer pattern on Friday and it has managed to hold above the gap area of September 28 and also, managed to reclaim its 20-DMA. Nifty Small-cap is better placed; however, the index has a wall of resistance placed in the zone of 6,033-6,083. A move above this could open gates for further upside.

With the strong pillars of the current rally i.e. Nifty IT and Reliance Industries taking a back seat and the broader indices that are showing a glimpse of promising signs, it’s time for them to put up their hands and support the bulls.

In the coming week, immediate resistance for Nifty is placed at 11,800 and a move above this level may take the index towards the levels of 11,880-11,900. While, on the downside, the level of 11,610-11,660 is crucial and a breach of this support level would open gates for a further correction towards 11,450 levels.

Traders should keep a close eye on India VIX as well, as for the first time after the last week of April, it has moved above the 10-week moving average and now 24 is an important level to watch out for. Any move above this level would lead to a breakout of the 9-weeks' range and this would be the first indication that the market is sensing some uncertainty in the near term.  

Overall, the cream of the crop of the last upmove takes a backseat as it’s time for the broader indices to step-up!  

IndusInd Bank: RBI levies a penalty of Rs 45 million on IndusInd Bank.

Dr Reddy’s Laboratories: Dr Reddy’s and Russian Direct Investment Fund (RDIF) receive approval to conduct clinical trials for the Sputnik V vaccine in India.

Cadila Healthcare: Zydus Cadila receives final approval from USFDA for Ursodiol capsules and tentative approval for Linagliptin and Metformin Hydrochloride tablets.

Can Fin Homes: National Housing Bank (NHB) has levied a penalty of Rs 5,000 plus GST on account of non-compliance with respect to the provisions of its Policy Circular no. 21. The company is supposed to maintain SLR investments to the extent of 13 per cent of its outstanding public deposits and create a floating charge on the same. It has maintained SLR investment to the extent of 14.65 per cent. However, there was a shortfall of 0.59 per cent in the charge created. Hence, the company has represented the matter before NHB.

Aurobindo Pharma: The company has entered into a share purchase agreement to acquire 100 per cent equity share capital of Mviyes Pharma Ventures Private Limited (MViyeS).

Dwarikesh Sugar: The company has commissioned a 40 MT per day capacity Co2 plant within the precincts of its distillery at Dwarikesh Nagar unit. The plant envisages capturing of Co2 emission from distillery operations and selling the same on a commercial basis, which would commence from October 19, 2020.