NIFTY Index Chart Analysis

Nifty retraces 50 per cent of its recent gains; 10325 to act as next support 

Indian stock market bulls had fought back the repercussions of Union Budget followed by Trump’s protectionist policies and trade war scare. The expected recovery in corporate earnings for Q4, favourable monsoon and expectations ahead of the Karnataka elections had brought in optimism in the markets, so much so that the benchmark indices had broken out of their psychological resistance levels. However, the political fall-out of the Karnataka elections and the concerns over rising crude oil prices washed off all the efforts of the bulls. Finally, the bears took the charge after BJP's fiasco in Karnataka and markets witnessed a steep fall. BJP’s failure to muster majority in Karnataka followed by the growing alliance of the Congress with the non-NDA parties weighed on the markets. On the global front, the crude oil prices hitting above USD 80/barrel and simultaneously the rising dollar turned out to be hiccups for the markets across the globe. All-in-all, RBI's status quo stance, attractive US economy and attractive other safe assets led to a sell-off in the Indian markets, especially by the foreign investors. 

The broader Indian markets have underperformed the benchmark indices, where mid-caps and small-caps washed off all the gains accumulated since March 2018. Defensive sectors such as IT, FMCG and pharma worked, but these sectors failed to counterbalance the weakness in the high-weight sectors such as banks and metals. 

Technically, Nifty hit below 10440, which is the 50% retracement level of the relief rally initiated on March 23, 2018 from above the 9951 level to 10929 on May 15. Nifty witnessed a reversal Doji and thereby plunged for 6 days with just one breather in-between. On May 23, Nifty closed below its 100-day EMA support level at 10476. On the weekly time frame also, Nifty had witnessed negative divergence in the prices and oscillators during its all-time high and the previous high. Thereby, it plunged and the current high acted as formation of lower top for the Nifty. It further breached its threeweek consolidation on the downside. Going forward, we hold 10325, which is the 61.8% retracement of the upward rally, followed by 10180, as likely supports for the Nifty. The levels of 10000-9950 would be the crucial trend reversal levels. On the way up, immediate resistance is placed in the region of 10,440-10,475 and a close above this level could lead to further upside up to levels of 10,540 and 10,630. 

STOCK RECOMMENDATIONS 

BAJAJ HOLDINGS & INVESTMENTS ...... BUY ...... CMP Rs 2847 

BSE Code : 500490
Target 1 .. Rs 3050
Target 2 ..... Rs 3150
Stoploss....Rs 2650(CLS) 

The stock of Bajaj Holdings & Investments is currently trading at Rs 2847. Its 52-week high and low stand at Rs 3035.75/Rs 2020 made on December 27, 2017 and May 24, 2017, respectively. The stock is rising with higher tops and higher bottoms since April 2009. Considering the weekly time frame, the stock had given a multiple resistance breakout at Rs 2245-2260 levels and had surged for seven consecutive weeks till August 2017. The stock consolidated till December end at all-time high levels, followed by gradual correction up to 38.2% retracement of the previous upward rally. The stock has bounced back recently. Considering the daily time frame, the stock just gave a slightly downward tilted multiple point trendline breakout at Rs 2915 with huge bodied candle supported by 3.8 times volume spurt on May 22. Moreover, the 14-period RSI too witnessed a consolidation breakout at 66. The stock is trading above its upper Bollinger Band at Rs 2797 level. We recommend a BUY. 

BERGER PAINTS INDIA ........... BUY ....... CMP Rs 281.60 

BSE Code : 509480
Target 1 ..... Rs 305
Target 2 ..... Rs 318
Stoploss....Rs 260 (CLS) 

The stock of Berger Paints is currently trading at Rs 281.60. Its 52-week high/low stand at Rs 293.65/ Rs 230.80 which were made on May 22, 2018 and August 23, 2017, respectively. Considering the weekly time frame, the stock witnessed a prolonged multiple resistance breakout on a weekly closing basis near to the Rs 280 level in the May 18 week, which was stretched from mid-September 2016. The stock confirmed the breakout in the current week and hit a new all-time high. The stock has also taken upward sloping trendline support during the correction, forming a kind of ascending triangle pattern. Every time, the supports were also backed by 100-period EMA support levels. Considering the daily time frame, the stock has created a strong rounding base pattern at the multiple support level of Rs 235-240. The stock gave a breakout at Rs 280 and witnessed a pullback near to 38.2% retracement of the previous upward rally, followed by a bounce back hitting all-time high. The volumes and oscillators support momentum going forward. We recommend a BUY.