NIFTY Index Chart Analysis

For the fourth straight week, the benchmark index registered a decline. The Nifty was down by 2.71 per cent. The Nifty Mid-Cap and Small-Cap indices are down by 5.75 per cent and 6.45 per cent, respectively. All the sector indices closed lower. The India VIX is up by 12.23 per cent to 14.63. The market breadth was extremely negative.[EasyDNNnews:PaidContentStart]

The FIIs also sold equities aggressively this week. They have sold `100,242.17 crore this month to date. This is the highest monthly selling figure in the FII’s history. The DIIs bought `97,090.83 crore. As cautioned earlier, the Nifty has moved far away from the mean levels and will experience mean reversion. This is precisely what is happening now. The Nifty decisively closed 2.11 per cent below the 20-week average. After the pandemic crash, the index registered the worst fall this month.

The index is clearly in a downtrend, as it formed lower highs and lower lows, trading below its key moving averages with five distribution days. These are all characteristics of a confirmed downtrend. The Nifty met the 61.8 per cent extension target of the head and shoulders pattern breakdown. It has already met the right shoulder breakdown target. The index declined by 8.39 per cent from its all-time high, the highest fall after the November 2022 to March 2023 fall. As stated earlier, the Category 1 correction of 10-13 per cent is due for a long time.Many company’s earnings have not met the market estimates.

As the earnings’ negative surprises continue, they will reflect the price action. The correction may continue for at least another quarter. For now, for all practical purposes, the all-time high of 26,277 is the top for the market. The Nifty is trading 3.77 per cent below the 50 DMA. The Bollinger bands are in a downtrend. The important technical development is that the 20 DMA has crossed under the 50 DMA, which is an intermediate bearish signal. The index is also below the 100 DMA, which acted as strong support earlier.

The 50 per cent retracement level of the prior upswing is at 23,779. The head and shoulder pattern breakdown target is at 23,651. So, this support zone (23,651-23,867) may be tested or violated sooner or later. The 200 DMA of 23,380 will tested once this support zone is breached. The Category 1 (10-13 per cent) correction will be completed. Expect the market to be in a downtrend till December-January. Expect the pullbacks or counter-trend consolidations of 2-4 weeks in the process.

The daily RSI (28.61) may try to come out of the oversold zone. But, the indicator may sustain in the oversold condition for a period, like it was in the overbought condition recently. The immediate resistance is at 24,558, which is 8 EMA. Only above this level is there a possibility of testing the 20 DMA of 24,991. The Mid-Cap 100 and Small-Cap 100 indices were already corrected by over 10 per cent. A majority of the stocks in the Nifty 500 are below their longterm averages. Many stocks which gave multi-bagger returns have corrected by 30-50 per cent now. If this correction continues, these stocks may correct over 60-75 per cent from their all-time highs.

The relative rotation graphs (RRG) show that the Nifty services sector, pharmaceuticals, consumption and IT indices are inside the leading quadrant. These sectors are losing momentum but may continue relatively outperforming the broader markets. The metal, bank, healthcare and consumer durable indices are in the improving quadrant, with better momentum. These may show some resilience compared to others. All the other sectors do not have good Relative Strength (RS) and momentum. Expect range-bound trading next week as it is a truncated one. The festive mood may result in a decline in volumes.

STOCK RECOMMENDATIONS

CARE RATINGS LTD ....................... BUY ......................... CMP ₹1,410.05
BSE Code : 534804
Target 1 .... ₹1,600 
Target 2 ..... ₹2,100 
Stoploss....₹1,200 (CLS)

The company is a knowledge-based analytical group offering services in credit rating, analytics, consulting, and sustainability. Established in 1993, the parent company CARE Ratings Ltd. is India’s second-largest rating agency, with a track record of rating companies across diverse sectors and holding leadership positions in high-growth sectors such as BFSI and infrastructure. The company has over 4,500 clients in the country. Through its subsidiaries, it has a presence in over 10 countries. Technically, the stock has broken out of a 33-week-long consolidation. Last week, it recorded a massive volume and validated the breakout. Its Relative Strength (RS) line is at a new high, showing an outperformance compared to the broader market. It has retraced by 78.6 per cent of the prior fall. It is above all the long-term averages. All the long-term and short-term averages are in an uptrend. The MACD has given a fresh, bullish signal. The RSI having bounced from the 60 support is a positive.

The Elder impulse system has formed a strong bullish bar. It is above the Ichimoku cloud and MAMA FAMA KAMA band. The band acted as support in the recent consolidation. Its buyer’s demand is high as institutional investors have raised their stake in the company. In short, the stock has registered a bullish breakout. Buy this stock above the ₹1,400-1,440 zone. Maintain a stop loss at ₹1,200. The medium-term target is at ₹1,600. The long-term target is above the previous high of ₹2,100.

GRM OVERSEAS LTD. ...................... BUY ........................ CMP ₹208.75
BSE Code : 531449
Target 1 ..... ₹270
Target 2 .... ₹300 
Stoploss....₹188 (CLS)

The company is engaged in the business of milling, processing and marketing branded and non-branded basmati rice in the domestic and overseas markets. The domestic business is conducted through GRM Foodkraft (P) Ltd. under their flagship brand name, 10X, offering essential consumer goods and kitchen necessities, encompassing rice, spices, flour, and ready-to-eat products. The company has tied up with over 200 distributors and over 1,800 stores globally with retail chains like Walmart, Carrefour, COOP, Sansbury’s, Tesco, Rimi, Westzone, Almaya, etc. It has signed agreements with Flipkart, BigBasket, Meesho, Amazon and Zomato. The stock is trading 29 per cent below its recent high. It retraced over 38.2 per cent of the prior uptrend and above the 50 per cent retracement level. Normally, the counter-trend ends at 38.2 per cent retracements.

It is trading 10.68 per cent above the 40-week average and 6 per cent above the 30-week average. Its Relative Strength (RS) line is 58, and any improvement above 60 will begin the outperformance. The EPS strength is fair at 66. Expect the stock price to take support at a 40-week average and bounce back. The company is expected to announce new initiatives for the global markets. The stock retested the prior resistance. Stay positive on the stock for a medium-term to long-term perspective. Buy this stock in the ₹208-220 zone. Maintain a stop loss at ₹188. The medium-term to long-term target is ₹270-300.

*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 October 25, 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.

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

[EasyDNNnews:UnPaidContentEnd]