NIFTY Index Chart Analysis

The Brent crude supply worries in the wake of fruitless OPEC meeting brought about a retreat in the Indian stock markets, which had otherwise remained range-bound due to lack of trigger. Despite expected higher production from Saudi Arabia and now Russia, the backdrop of lower output from Libya and Canada and restrictions on Iran led to a bounce back in oil prices, which hit nearly 78$/barrel. Further, the rupee weakening to an all-time low of 69.09 against dollar fuelled negative sentiments in the markets. Otherwise, the ongoing trade war tweets by Donald Trump and the combative response from China has resulted in volatility in the global bourses and the Indian stock markets. This led to a breakdown in the benchmark indices and a downfall in the broader indices. 

However, the positive domestic cues in the form of macroeconomic data have refrained markets from witnessing a sharp fall, despite the significant breakdown. The auto sales bloomed for the third consecutive month in June of FY19. However, the running costs of vehicles have surged on the back of rising fuel prices, which will act as headwinds at the backend. Secondly, the country’s Nikkei Manufacturing PMI rose to 53.1 in June at the fastest pace in 2018 as against 51.2 in May. The robust domestic and international demand for eight consecutive months cheered manufacturing activity. Services PMI too grew at a fastest speed to 52.6 in June from 49.6 in May. 

We are heading towards corporate earnings for Q1 of FY19 starting with TCS and IndusInd Bank, which are set to be declare their results on July 10. The earnings season, followed by the monsoon, will drive the markets in the coming sessions. Markets will also remain vulnerable to the external factors that are nagging the world markets.

Technically, our benchmark index Nifty gave an upward sloping trendline breakdown of the symmetric triangle pattern mentioned earlier. The breakdown was at 10700 on June 27, supported by justifiable volumes. However, Nifty reversed from 10557, which is above its prior major support at 10550 levels. However, Nifty remained gloomy with very gradual higher highs almost on a daily basis, as if in the form of a pullback. Going forward, treating 10550 as a major support, followed by fresh buying, we hold 10800-10840 as the immediate resistances, followed by 10895-10930. If it is just a pullback and if Nifty retreats from here, we hold 10700-10640, followed by 10550, as supports. 

On the weekly time frame, Nifty has bounced back last week from the triple bottom near the 10550 level and it is heading towards the downward sloping trendline breakout at 10815. Above 10,815, Nifty may scale up to levels of 10930 and 11000. On the other hand, any retreat from here below 10550 would drag down Nifty to the levels of 10440-10415. All-in-all, the global headwinds and the positive domestic triggers are expected to leave the Indian stock markets clueless for some more time.

STOCK RECOMMENDATIONS

EXIDE INDUSTRIES .......... BUY .........CMP Rs 262.15 

BSE Code : 500086
Target 1 .. Rs 280
Target 2 ..... Rs 286
Stoploss....Rs 245 (CLS) 

The stock of Exide Industries is currently trading at Rs 262.15. Its 52 week high and low stand at Rs 270.40/Rs 192.85 made on May 8, 2018 and February 6, 2018, respectively, portraying a sharp upmove in three months. Considering the daily time frame, after hitting 52-week and all-time high, the stock hit lower tops and multiple bottoms in the range of Rs 242-246, forming a kind of triangle pattern at the peak levels. The stock gave a triangle pattern breakout at Rs 258 on July 3, 2018 on a closing basis with justifiable volumes and the 14-period RSI quoting at 62, suggesting further momentum. Meanwhile, the stock also took support at 50-day EMA level almost every time it tried to hit the levels. On the weekly time frame, the stock has formed a pennant-like pattern with a breakout at the same Rs 258 level. On the weekly time frame, though the 14-period RSI is nearing 70 level, it has an upward sloping trendline resistance above 78 level, which gives some more room to surge. We recommend a BUY.

AUROBINDO PHARMA ........ BUY ......... CMP Rs 625

BSE Code : 524804
Target 1 ..... Rs 665
Target 2 ..... Rs 684
Stoploss....Rs 575 (CLS)

The stock of Aurobindo Pharma is currently trading at Rs 625. Its 52-week high/low stands at Rs 808.95/ Rs 527.05 which were made as on November 7, 2017 and June 4, 2018, respectively, portraying a downtrend in the recent past. After hitting 52-week low, the stock witnessed a Doji pattern on the daily time frame and, thereby, it gave a sharp reversal hitting above its two immediate resistances at about Rs 614 and Rs 621 levels. Meanwhile, the stock formed a V-pattern. Thereafter, the stock consolidated for 11 days in a row, followed by a big breakout with a huge bullish candle on July 3, 2018. The stock gave a kind of V-pattern breakout near Rs 626, along with a downward sloping trendline breakout at Rs 620. The stock closed above its 50-day and 100-day EMA levels and is nearing 200-day EMA level at Rs 631. The volumes are huge and the 14-period RSI is quoting at 62, suggesting momentum. The RSI and the stock price also depict a positive divergence. We recommend a BUY.