NIFTY Index Chart Analysis
The pressures of rising political uncertainties in India and the increasing geopolitical tensions across the globe have stressed out the Indian stock markets. The uncertainty on continuation of the BJP rule at the Cetre, Italy’s politico-economic crisis and the overall US domination in terms of Trump’s policies, economic boom and appreciating dollar have together weighed on the markets. The sharp rise in the global crude oil prices poses a threat as it may fuel inflation and inflate country's current account deficit.
The effect was visible after RBI introduced the much-expected rate hike in its June bi-monthly policy review. The RBI has raised repo rate by 25 bps to 6.25% and the reverse repo too has been hiked to 6%. The same is expected to weigh on the borrowers, with the expected rise in the EMIs of loans. The rise in inflation in April after a drop in February and March and the CPI expected to hit above 5% yet again provoked the RBI to take the course of rate hike. Indian markets seemed to have discounted the news in the last few sessions and have bounced back. Indian stock markets have seen FII outflows in 18 out of 22 trading sessions in May. The DIIs have cushioned the FII outflows by investing Rs 13,573.97 crore in May. However, the major source of capital for the markets in 2017 were the MFs, which reduced exposure to mid-caps and small-caps in 2018, which caused tremendous sell-off in broader markets. These sentiments weighed on the benchmark indices too. Recently, SEBI introduced Additional Surveillance Measures (ASM) on 109 stocks, specifically the mid-cap ones to curb volatility and abnormal stock price movement. To control speculation, the stocks would have 5% circuit limits and 100% margin on open positions, like in T2T.
Technically, the benchmark index Nifty bounced from its 50% retracement of the upward move from March 28 week to May 18 week, i.e. from 9958 to 10929 levels. Nifty surged for a week, but recently it has witnessed consolidation due to lack of positive triggers to uplift the prices. The surge was limited to 61.8% retracement of the correction from 10929 to 10420, where Nifty resisted for three consecutive days on a closing basis. The declining volumes and the 14-period RSI straggling at 50-50 levels suggest lack of momentum, for now. With little movement expected upside or downside, i.e. indecisiveness in the near term, we hold 10585-10550 as the supports, with 10530 acting as upward sloping trendline support.
The level of 10415 will be the next crucial support, which would act as provisional trend reversal. Currently, Nifty price is above the all major EMA levels, and hence, if Nifty sustains above 10750-10770 on a closing basis, which is its multiple resistance level, we expect it to hit 10880, which is the downward sloping trendline level. In case of a breakthrough for bullish trend continuation, we hold 10930 as the next resistance.
STOCK RECOMMENDATIONS
RBL BANK LTD .......... BUY ......... CMP Rs 518.45
BSE Code : 540065
Target 1 ..Rs555
Target 2 .....Rs563
Stoploss....Rs481(CLS)
The stock of RBL Bank is currently trading atRs518.45. Its 52-week high and low stand at Rs553.20/Rs443 made on June 7, 2017 and March 8, 2018, respectively. The stock hit a double top at Rs599-600 levels in April and May 2017 and, thereby, it witnessed slightly downwardtilted channel pattern movement. Since January 2018, the stock formed an inverse head & shoulders pattern within the channel. The head formation witnessed a breakout of the upward trendline of the channel, but witnessed a pullback of up to 50% retracement of the rounding bottom from Rs443 to Rs545 levels, creating the right shoulder. The 50% retracement level was 100-day and 200-day EMA support levels. Recently, the stock witnessed a pullback after three consecutive upticks, followed by a bounce on June 5, 2018. The bounce was supported by volume spurt and the 14-period RSI crossover above 50. We recommend a BUY.
GODREJ INDUSTRIES ............ BUY ............. CMP Rs599.35
BSE Code : 500164
Target 1 .....Rs647
Target 2 .....Rs658
Stoploss....Rs553 (CLS)
The stock of Godrej Industries is currently trading at Rs599.35. Its 52-week high/low stand at Rs699.70/Rs501.50 which were made as on July 21, 2017 and February 6, 2018, respectively. Considering the monthly time frame, the stock has formed a flag pattern and witnessed a breakout at Rs609 level, followed by a pull-back and a bounce is in the making in the current month. The same flag acts as a downward sloping channel. Since May 2, the stock tumbled from Rs631 level to Rs525 and formed a bullish hammer-like pattern on May 24. Thereby, it bounced back and has formed a kind of V pattern, which has a breakout at Rs609. The volumes are justifiable and the 14-period RSI is quoting at around 60, which suggest momentum. Further, the 14-period RSI has cut its 9-days average RSI upwards and RSI is in a rising trajectory. We recommend a BUY.