NIFTY Index Chart Analysis

With huge three-day price swings during the last week, equities rebounded and closed almost at the previous week’s high. As the geopolitical tensions eased, all the sectoral indices closed higher. Despite the technical pullback and Nifty closing at the high of the prior week, it is important to note that the positive closing doesn’t necessarily reflect a strong bullish bias. On Monday, the index traded higher with the help of heavyweight banks such as ICICI Bank, HDFC Bank, State Bank of India and Axis Bank, and closed at its highest level after April 10. On the weekly chart, last week the index formed a long upper shadow and a small body candle, which typically indicates market indecisiveness.[EasyDNNnews:PaidContentStart]

This could be a key factor in understanding the current market sentiment. Last Friday, the market came under selling pressure. On the monthly chart, the index is repeating the Doji candle pattern observed from January until last Friday. However, Monday’s rally significantly altered the index’s performance, which saw it closing above the March high and erasing the bearish bias. At the same time, Nifty formed a hanging man candle. If the index closes negatively at the end of next month, it could indicate a topping formation. As of today, just a day before the monthly close, the volumes have been declining for the last three months.

Over the past four months, the index has been trading in a 1,000 points range, showing higher lows in a rising channel. Notably, the price action within this rising channel has been erratic. The index’s movement out of the current 1,000 points range could potentially trigger a strong directional move in the market. The 10-week average of 22,313 is immediate support for next week, and the 20-week average 21,993 is the strong support. If this support zone breaks with high volume, it could indicate a potential test of the prior major swing low of the 21,329-21,240 zone.

On the upside, the index should at least register a high close on a weekly basis, which means the index must close above 22,520. If the index manages to close above this level, it has the potential to test the 23,200 level. Nifty closed on the 20 DMA support, and the Bollinger bands are narrowing on daily and weekly charts. This indicates range-bound action for another week or two before the event risk of the general elections. Expect a directional move.

In fact, it formed more indecisive candles than Nifty. The weekly and daily MACD are bearish. The daily RSI of Nifty is reacting from the 60 zone as it failed to shift its range into the strong bullish zone. The volatility index, India VIX, tested below 10 levels, which is the lowest in recent times. When VIX is at lower levels, expect an unexpected spike as it has an inverse relationship. In this scenario, if the Nifty makes a new all-time high, a strongly bullish bias will emerge. In any case, if the index fails to make a new high, it is better to be selective on new purchases.

Be with good earnings and strong relative strength. Foreign institutional investors (FIIs) have sold a significant amount up to Rs 36,933.21 crore this month. In this calendar year, they sold a massive Rs 85,559.33 crore. On the other hand, domestic institutional investors (DIIs) bought Rs 21,000 crore last week, providing crucial support to the market. India VIX is down by 18.82 per cent to 10.92. On Wednesday, it tested 9.85, the lowest in recent history. On Monday, the VIX was up by over 12 per cent, and the index rallied almost a per cent. This spurt in price and the VIX is a new phenomenon.

The relative rotation graphs show that only the metal and automotive sector indices are in the leading quadrant, losing momentum. The banking and financial sector indices are in the improving quadrant, but Friday’s decline may lead to momentum loss. Consumer durables are in the improving quadrant and may outperform the broader market. All the other sector indices are losing their relative strength and momentum as well.

STOCK RECOMMENDATIONS

HAVELLS INDIA LIMITED ..................... BUY .................... CMP ₹1,645.00
BSE Code : 517354
Target 1 .... ₹1,945 
Target 2 ..... ₹2,120 
Stoploss....₹1,550 (CLS)

Havells India Limited is engaged in the manufacturing of switch gears, cable, lighting and fixtures (LF) as well as electrical consumer durables (ECD). The company is also engaged in the manufacturing of motors, pumps, personal grooming equipment and water purifiers. It operates through the following brands: Havells, Lloyd, Crabtree, Standard, REO and Havells Studio. Lloyd’s consumer segment provides products like air-conditioners, LED televisions and washing machines. The company has launched the ‘Meditate’ air purifier under the premium brand Havells Studio. Its cables segment contributes 33 per cent of the revenue. Technically, the stock has broken out of an eight-week flat base and closed at an all-time high. It also registered a multi-year breakout. On the monthly chart, it has broken out of a 29-month cup pattern and retested and bounced. As the stock is in uncharted territory, it has cleared all the resistance. It is comfortably placed above all long-term averages, and all of them are in an uptrend. It is 9.64 per cent above the 50 DMA and 19.11 per cent above the 200 DMA. Its Relative Strength (RS) line is above the 21 EMA, showing an outperformance compared to the broader market. The weekly MACD shows a strong bullish momentum. The RSI took support at 60 twice and bounced. The Daryl Guppy’ GMMA is also in an uptrend. In short, the stock has registered a fresh breakout and reached a new high. Buy this stock above ₹1,630. Maintain stop loss at ₹1,550. The medium-term target is ₹1,945.

ENGINEERS INDIA LIMITED .................... BUY .................... CMP ₹238.35
BSE Code : 532178
Target 1 ..... ₹300 
Target 2 .... ₹330 
Stoploss....₹200 (CLS)

Engineers India Ltd. (EIL) is a leading global engineering consultancy and EPC company that provides services mainly focused on the oil and gas and petrochemical industries. It has also diversified into sectors like infrastructure, water and waste management, solar and nuclear power and fertilisers to leverage its strong technical competencies and track record. It has established a sophisticated research and development centre in Gurgaon and developed more than 35 process technologies. It currently holds 36 patents and has 31 patent applications. Technically, the stock closed at the prior high of a 10-week counter-trend consolidation. It is in the second base of Stage 2 and has retraced above the 61.8 per cent retracement level of the prior fall. The higher volume indicates fresh buying interest. The stock gained 13.55 per cent last week, forming a strong bullish bar. On the daily chart, it has broken out of an inverted head and shoulders pattern with a massive volume. It closed above the Anchored VWAP resistance and is trading 11.74 per cent above the 50 DMA. The daily Bollinger bands have begun to expand. The weekly and daily RSI have entered into a strong bullish zone. The weekly MACD is about to give a bullish signal. The Elder impulse system has formed a strong bullish bar. All the long-term and short-term averages are in an uptrend in Daryl Guppy’s GMMA indicator. In short, the stock has emerged out of a counter-trend consolidation. Buy this stock above ₹237. Maintain a stop loss at ₹200. The medium-term target is at ₹300.

*LEGEND: ◼EMA - Exponential Moving Average. ◼MACD - Moving Average Convergence Divergence ◼RMI - Relative Momentum Index ◼ROC - Rate of Change ◼RSI - Relative Strength Index

(Closing price as of April 29, 2024) 

Disclaimer : Above recommendations are based on various technical parameters and any fundamental input has not been considered for the recommendations. Follow strict stop loss for the recommendation. 

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