Technicals

WHAT LIES AHEAD: NEAR-TERM PICTURE



SPOT NIFTY: Last moment bounce-back on the day of May F&O expiry brought some cheer in the Indian stock markets. Indian benchmark indices had retreated after Karnataka election results, followed by the crude oil price rise above USD 80/barrel and depreciating rupee. Further, markets remained subdued ahead of the politico-economic turmoil in Italy. However, markets across the globe stabilised after the fears on the Italian crisis eased on hopes of formation of a new government and resolution of the crisis.

Among the broader markets, Mid-cap and Small-cap indices are off their provisional lows, with the Mid-cap index outperforming the benchmark indices, while the Small-cap index remained in line.Metal outperformed all sectoral indices and gained 3% in the last five trading sessions, while IT remained subdued and lost 0.5%.

Technically, Nifty breached its psychological resistance level of 10710-10730. Nifty hit above 61.8% retracement level of the prior downward rally from 10929. The bounce-back in oscillators and rising volumes suggest some more upside. In case Nifty sustains the bounce, we hold 10900 as the next resistance, which is its weekly trendline level. However, if the upside is news-based, then on the downside, the levels of 10660-10600 will act as the supports for the Nifty.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short-term expectation of volatility, dropped 1.40 per cent and settled around 13.22. Nifty June 2018 futures closed at 10703.50 at a discount of 32.65 points over spot closing of 10736.15. Nifty July 2018 futures closed at 10715.15 at a discount of 21 points over spot closing of 10736.15. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.17 for June month contract.

Among Nifty calls, 10,700 Strike Price from the June month expiry was the most active Call. Among Nifty Puts, 10,600 Strike Price from the June month expiry was the most active Put. For the June series, the maximum OI outstanding for Calls was at 11,000 strike price, and for Puts, it was at 10,600 strike price.

LEGEND : 
EMA - Exponential Moving Average
MACD - Moving Average Convergence Divergence
RSI - Relative Strength Index

STOCK STRATEGY

SUNDRAM FASTENERS ............... BUY .............CMP Rs.632

BSE Code: 500403
Target 1: Rs.672 Target 2: Rs.680
Stoploss: Rs.585 (CLS)



Current Observation: The stock, after registering a high of Rs 642.90 on March 15, 2018, entered into a corrective phase. The correction halted near about its 100-day SMA. Also, the stock formed strong base around the levels of Rs 568-572.

At present, the stock has witnessed breakout of downward sloping trendline joined from the high of Rs 642.90 along with robust volumes. Additionally, on the daily time frame, it had formed a sizeable bullish candle, which adds further strength to the set-up.

The stock is trading above its 50-day SMA and 100-day SMA, which is positive for the stock. The 14-period RSI on the daily time frame is in bullish zone and in the rising trajectory. The level of Rs 585 is likely to act as a strong support and this could be maintained as a stop loss for long positions. On the upside, the stock is likely to touch the levels of Rs 672-680.

Conclusion: Considering the breakout of the downward sloping trendline along with robust volumes and the stock trading above its important moving averages, we recommend buying this stock for a target price of Rs 672-680, with a stop loss at the level of Rs 585.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Infosys Ltd at Rs 1221.85 in issue no. 32 (dated May 28, 2018). The stock moved in line with our expectation and made a high of around Rs 1248 and retreated.

At present, the stock is trading above our recommended buy price and the technical set-up still looks good. Hence, we would recommend our readers to hold the stock for the target of Rs 1,280.