NIFTY Index Chart Analysis

NIFTY Index Chart Analysis

Nifty Perks Up On Short Covering; Fresh Buying Yet To Come

Markets have been vulnerable to the US President Donald Trump's abrupt actions. Trump's controversial proclamations continue; this time it was the signing of the memorandum targeting imports from China. The expected trade war between the world's two largest economies threatened the markets across the world. Further, the US Federal Reserve's 25 basis points interest rate hike to 1.5% and indications of more hikes to come during the year dampened the sentiments. On the domestic front, the ongoing free fall in the public and private sector banks, realty and metal sectors added to the sell-off in the Indian markets. All-in-all, along with the sinking broader markets, Indian benchmark indices too had breached their major supports, whereby Nifty plunged below the 10,000-mark.

However, Nifty bounced back from its second crucial support of 9,950 at the end of the last week due to short covering. The renegotiation of tariffs between the US and China eased the trade war anxiety amongst the investors, leading to a bounce back in the global indices. On the domestic front, a surprise rate cut in government borrowing programme raised hopes of RBI keeping the rates unchanged and not hiking in the next policy review, which will be announced on April 5. The country might borrow Rs.2.88 trillion in the first half of FY19. These factors helped the markets go off lows, even during March F&O expiry. The fiscal deficit number is expected to be higher by 0.3% of the GDP, while uncertainty persists on recapitalisation and merger of public sector banks.

Nevertheless, the short covering may continue for the next month too on diminishing trade war concerns and expected revival in the Q4 corporate earnings. However, volatility would continue in the wake of state election hustle-bustle in April-May.

Technically, Nifty bounced back at the end of the last week and witnessed sharp upside at the start of the current week, making a kind of double bottom on the weekly time frame. On the daily time frame, Nifty took major support at the 9,950 level, which was mentioned after Nifty broke the levels of 10,075-10,035.Nifty had breached its 200-day EMA support level, but it is currently trailing just above the levels. Hence, in case we see fresh buying in the markets, we hold 10,280, followed by 10,480 as the major resistance levels, provided 10,215 level is duly broken which is its 50% retracement level of the downward rally.

Above 10,480, Nifty would retest its upward sloping trend line level and give a short-term trend reversal. However, bulls are quite hesitant to give immediate momentum upside, with oscillators still lying below 50.

Moreover, Nifty is trading with lower tops and lower bottoms and would continue to do so, unless 10,215-10,230 is broken on the upside. In that case, if it retreats, we hold 10,050, followed by 9,950, as the immediate supports if the levels of 10,115-10,110 is breached on the downside. Below 9,950 level, support at the levels of 9,850-9,770 is inevitable. Hence, 10,630 on the upside and 9,685 on the downside would act as trend reversals.

STOCK RECOMMENDATIONS

BAJAJ FINANCE (BUY)  

CMP Rs.1762 
BSE Code : 500034
TGT 1:Rs. 1900
TGT 2: Rs.1970
SL Rs.1655 (CLS)

The stock of Bajaj Finance is currently trading at Rs.1762. Its 52 week high/low stand at Rs.1989/Rs.1152.60 which were made as on September 8, 2017 and April 5, 2017, respectively, and depicts an uptrend in the long run. However, after hitting its 52-week high or all-time high, the stock had been witnessing gradual correction. On February 5 and 6, the stock had hit below its multiple support range of Rs.1575-1590 near the Rs.1514 level, but bounced back in intra-day trade and sustained above the levels on a closing basis. Since then, the stock has formed a small ascending triangle pattern on the daily time frame. Recently, the stock breached its multiple resistance at Rs.1737-1745, i.e., the upper trendline of the triangle, which also acts as a provisional trend reversal. It also broke its downward sloping trend line at Rs.1770. Volumes are justifiable and the 14-period RSI quoting at 63 suggests momentum in the stock. The stock also has a multiple point upward sloping trend line support at Rs.1646.

TEAMLEASE SERVICES (BUY)  

CMP Rs.2217
BSE Code : 539658
TGT 1:Rs. 2400
TGT 2: Rs.2500
SL Rs.2065 (CLS)

The stock of Team Lease is currently trading at Rs.2217. Its 52 week high and low stand at Rs.2536.80/ Rs.927.50 made on December 26, 2017 and March 29, 2017, respectively, showing an uptrend in the long run. Considering a weekly time frame, the stock has been consolidating at 50% retracement of the prior upward rally up to its 52-week or all-time high levels. Meanwhile, the price has taken 21-week EMA support during consolidation. Considering the daily time frame, the stock formed a descending triangle pattern, where the lower horizontal trend line is a multiple support range of Rs.1990-2000. The stock gave a breakout of the pattern at Rs.2175 on March 27, 2018, on a closing basis. The breakout was supported by spurt in volumes and the 14-period RSI trailing at 57, depicting momentum going forward. The stock is also trading above its 21-day and 50-day EMA levels. The 14-period RSI has also broken out of its multiple resistance at 55.

(Closing price as of Mar 28, 2018).