Market Outlook
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Technical Strategy: Pendulum to swing towards 15400.. May 2021 Research Analysts Dharmesh Shah Nitin Kunte, CMT Ninad Tamhanekar, CMT [email protected] [email protected] [email protected] Pabitro Mukherjee Vinayak Parmar [email protected] [email protected] April 29, 2021 Pendulum to swing towards 15400.. Technical Outlook.. NSE Nifty Daily Bar Chart • Despite anxiety around surging Covid-19 cases across India, Target @ We expect index to resolve higher and gradually retest 8% the index managed to hold the key support threshold of life highs of 15430 in coming months 15432 15430 14200 on multiple occasions, highlighting elevated buying 8% demand emerged after approaching maturity of price and time wise correction. Eventually, the index logged a resolute breakout from past two months downward sloping channel, Support indicating conclusion of corrective bias that augurs well for @ 14200 next leg of up move • We expect the index to resolve higher and gradually retest Elevated buying demand emerged from PICK MOMENTUM lifetime highs of 15430 in coming months. In the process, 100 days EMA coincided with Lower stock specific action would prevail amid progression of band of channel at 14200 Q4FY21 result season. Thus, dips should be capitalised on to Sectoral Technical Monthly accumulate quality large cap and midcaps • Broader market indices showed resilience by forming higher Daily RSI oscillator pointing upward after generating bullish crossover, indicating positive base above 50 days EMA. We expect Nifty midcap, small cap bias indices to regain upward momentum and relatively outperform the benchmark Sectors Outperformers Bargain Buy Relative rotation graph projection: Cyclicals to outperform HDFC, Kotak Bank, Bajaj Finserv, Aavas Axis Bank, Indusind Bank, Sundaram BFSI Financiers Finance 40 Technology & Returns Returns Ranking Wipro, Mindtree, FSL, Cyient TCS, L&T Infotech, Reliance Industries Ranking Telecom 35 Consumption PolyCab, Dixon, Vguard Titan, Voltas, Trent, Asian paint 30 Bargain Buy Outperformers TVS Motors, Escort, JK Tyres, Mahindra 25 Auto Tata Motors, M&M, Balkrishna Industries Metal, Pharma & BFSI, Consumption, Research Equity Retail CIE 20 Chemical Thermax, SKF, ACE, Carborandum Telecom – Capital goods L&T,BEL, Control Print 15 Research Equity Retail Universal, Cummins India – Tatasteel, Graphite, JSPL, SAIL, Hindustan 10 Metals Copper 5 Neutral Market Performers Infra and Realty Godrej Properties,Ambuja Cement. PNC Infra, KNR Construction, Birla Corp 0 Infra, Oil&Gas IT, Auto -5 -------- Potential Returns (%) -------- (%) Returns Potential -------- Pharma & Divis, Cipla,Sequent, Galaxy Surfactants, Securities ICICI Indoco Remedies, Shilpa Medicare, Lupin Chemical Ajantha Pharma -10 Returns Ranking Returns Ranking Deepak Nitrate, GNFC, KPR Mills, GDL, -15 Adani Port ,VIP Industries, Indigo, Indian 1 2 3 4 5 Others Orient Ref, Rossari Bio, Camline Fine, Securities ICICI Hotel -20 -------- Technical Ranking -------- Moldtek Packaging, Visaka Industries * Ranking improves from 1 to 5 Source: Spider Software, ICICI Direct Research 2 April 29, 2021 ICICI Securities Ltd. | Retail Equity Research Nifty: Elevated buying demand emerges at lower band of falling channel coinciding with 100 days EMA… Nifty – Weekly Bar Chart 8% Target @ correction Technical Outlook 15432 15400 Since March 2020, price wise index has a maintained rhythm of not correcting more than 8% o The index has formed a higher base correction average 9% while time wise not extended correction for more than 2-3 consecutive weeks above 100 day’s EMA coincided with lower band of channelised move of Support @ past two month’s correction. Going 13597 14200 ahead, we expect the index to resolve higher and gradually head 12430 9% 100 Days towards 15400 in coming months correction EMA PICK MOMENTUM o Since March 2020, the Nifty has maintained rhythm of not correcting 8% more than 9% and time wise not Sectoral Technical Monthly correction correcting for more than two to three Key support is placed at 14200 as it is: 11% 10790 consecutive weeks. Past two correction - lower band of falling channel placed month’s 8% corrective move hauled at14200 the Nifty in the vicinity of the lower - 100 days EMA is placed at 14200 band of falling channel. The current - Last week’s panic low is placed at 14151 elevated buying demand confirms 11% that the aforementioned rhythm has correction been maintained. Hence, any dip 8806 from here on should be capitalised on to accumulate quality large and mid caps as we expect stock specific action to continue amid ongoing Q4FY21 result season Research Equity Retail – 7511 Research Equity Retail o Structurally, we believe any dip from Weekly Stochastic logged bullish crossover, indicating positive bias – here on would get anchored around 14200 as it is confluence of: o a) lower band of falling channel placed at14200 o b) 100 days EMA is placed at 14200 Securities ICICI c) last week’s panic low is at 14151 ICICI Securities Securities ICICI Source: Spider Software, ICICI Direct Research April 29, 2021 ICICI Securities Ltd. | Retail Equity Research 3 Bank Nifty: Maturity of price wise correction. We expect index to gradually head towards 36000 in coming months… Bank Nifty – Weekly Bar Chart Technical Outlook 19% 37708 A falling channel breakout and a strongest pullback in the last two months corrective correction Target @ o The Bank Nifty on the monthly time decline signals resumption of primary up trend. We expect it to gradually head towards 36000 frame formed a bullish hammer like 36000 levels in the coming months candle highlighting strong buying demand at lower levels near major support area of 30500 amid oversold placement of the weekly stochastic 30405 29687 o The index has witnessed a strong PICK MOMENTUM pullback of more than 3000 points in 20% the last one week (strongest in the Correction Key support in the range of 30500- entire last two months decline) and in Sectoral Technical Monthly 25232 30000 as it is the confluence of : the process registered a breakout - The rising long term 200 days above the falling channel containing 21% Correction EMA placed around 29930 entire decline signalling end of 21967 - Price parity with two major corrective phase and resumption of correction in the last 13 months uptrend - The last two weeks almost o Going ahead, we expect it to gradually 20405 identical lows placed around head towards 36000 in coming 30500 levels months as it is the 80% retracement of the entire decline (37708-20405). Therefore, any corrective decline from here on should be capitalised on to 17105 Weekly stochastic is seen rebounding from the oversold territory thus 16116 accumulate quality banking stocks Research Equity Retail validates pullback in the index in the coming weeks – o The index maintained the rhythm of Research Equity Retail not correcting more than 20% as – witnessed since March 2020. In the current scenario it rebounded after correcting 19% from the all-time high (37708). Hence, it provides favourable ICICI Securities Securities ICICI risk-reward setup for the next leg of up move ICICI Securities Securities ICICI Source: Bloomberg, Spider, ICICI Direct Research April 29, 2021 ICICI Securities Ltd. | Retail Equity Research 2 Nifty Midcap Index: Higher base formation above 50 days EMA, signifies inherent strength… Nifty Midcap 100 – Weekly Chart Nifty – Weekly Bar Chart Index maintained the rhythm of not correcting for more than 9% 9% 8% over two to three consecutive weeks and subsequently forming a higher base above 50 days EMA 9% 21840 10 Weeks EMA MOMENTUM PICK MOMENTUM Monthly Technical Sectoral Technical Monthly 9% Key support @ 22800 as it is confluence of 50 days EMA coincided with April low Broader market indices have shown resilience by forming higher base above 50 days EMA. We expect broader market to regain upward momentum and relatively outperform the benchmark in 9% coming weeks, based on following observations: • Since March 2020, the index maintained the rhythm of not correcting for more than 9%. Research Equity Retail – Meanwhile, time wise correction has not exceeded more than two to three weeks Research Equity Retail • On multiple occasions, elevated buying demand emerged from 10 week’s EMA, which has been – held since June 2020 • Strong positive correlation with developed market peers has been maintained for Midcap index as global broader market indices bounced after forming a higher base around life-time high ICICI Securities Securities ICICI ICICI Securities Securities ICICI Source: Bloomberg, Spidersoftware, ICICI Direct Research April 29, 2021 ICICI Securities Ltd. | Retail Equity Research 3 Small cap index: Higher base formation above 50 day’s EMA, signifies inherent strength… Nifty Small cap 100 – Weekly Chart Nifty – Weekly Bar Chart 9656 Maturity of price wise and time wise correction 8% 7% augurs well for resumption of primary up trend.. MOMENTUM PICK MOMENTUM 10% 10 Weeks EMA Monthly Technical Sectoral Technical Monthly 10% We expect within broader market space Small Cap index would witness catch up activity, based on: • once again intermediate correction anchored in the vicinity of 10 week’s EMA, thereby maintaining the rhythm of respecting 50 days EMA, since June 2020 9% • Price wise the index has not exceeded intermediate correction for more than 10% while time wise correction has not exceeded more than two to three consecutive weeks, which have eventually Research Equity Retail – offered