Equity benchmark extended losses over the second consecutive week as surging crude oil weighed on market sentiment. Nifty settled the week at 24252, down 0.5%. In contrast, the broader market showed remarkable resilience. The smallcap index stole the spotlight, scaling to fresh all-time highs, up 1.2%.
On the sectoral front, rotation continued as the Capital Market index regained momentum after two months breather, accompanied by buying interest in realty and metal, while FMCG and IT extended their breather.
Technical Outlook this week
According to Dharmesh Shah, Technical Head and Vice President at ICICI Securities, Nifty started the week on a subdued note. However, supportive efforts from the rising trend line helped the index to recoup some of the losses. As a result, the weekly price action resulted in a hammer-like candle.
The index has once again defended its four-month rising trend line (at 24000) despite geopolitical uncertainty. Thereby, 24000-23800 remains the primary line of defense which we expect to hold, he further stated.
“The index has snapped its 12 sessions corrective phase and triggered a classic trend reversal pattern. Similar pattern was observed during September 25 and June 26. In both cases, after breaking 8-12 sessions corrective phase, index staged a 5-6 per cent rally in subsequent weeks. We expect index to maintain similar rhythm and unlock the next leg of up move,” Shah noted.
Shah further said the current structural improvement highlights revival in momentum and restores the positive bias wherein “we expect Nifty to gradually resolve towards 24600 levels in coming weeks.” “Therefore, accumulating quality stocks on dip would be the prudent strategy to adopt,” the analyst emphasised.
Mirroring the benchmark move, Shah stated the Bank Nifty staged a strong rebound from its four months rising trend line and formed a higher base above its 200 days EMA, highlighting robust price structure which would propel Nifty to resolve higher as financials carries 36% weightage in Nifty.
Defying the headline volatility, buoyancy reinstated in Small cap index that surged to new highs. The rising ratio chart of Small cap / Nifty reinforces our conviction for sustained outperformance in the broader market going ahead, he said.
“Off April lows, index has built a series of durable higher bases. Remarkably, market breadth (% of stocks above 200 DMA of Nifty 500 universe) at each base expanded sharply, moving from 19% to 38%, 48% and now at placed at 56%. This strengthening breadth amid geopolitical uncertainty clearly indicates that negativity is already priced in and now focus is on the stocks backed by strong earnings,” he added.
After Brent crude peaked at $120 in March, intermediate rallies have exhausted around the 80% retracement of prevailing decline. Following the historical rhythm, the current 80% mark is placed at 97 which would act as stiff resistance, Shah stated.
Key Monitorables this week
3. Potential relief if Brent crude reverses from key resistance of $97
Stock recommendations this week
For DLF, he said, the stock has undergone strong base formation around its 52 weeks. Recommend buying in the range of Rs 666-Rs 685 for the target of Rs 732 and maintaining a stoploss of Rs 649, he said, “In the process, it witnessed slower pace of retracement wherein during past five weeks consolidation it merely retraced 38.2% of preceding five weeks (Jun-Jul) 25% up move. The current higher-low formation after healthy consolidation signifies resumption of up move.”
For Asahi India Glass, he said the stock has been trading in an upward sloping channel wherein consistent buying demand emerged from 52-week EMA on several occasions.
“Slower pace of retracement and breakout from short-term consolidation suggest further upward momentum,” Shah stated and recommended buying the stock in the range of Rs 930-Rs 960 for the target of Rs 1075 and maintaining a stoploss of Rs 888.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
