NIFTY Index Chart Analysis

The depreciation of the rupee to an all-time low and other concerns like probability of yen carry trade unwinding and a sharp sell-off in the banking stocks gripped the equity markets. Nifty resumed its downtrend with an impulse move on Monday. Before this sharp slide, it gave a weaker signal on Friday, with a high-volume decline – distribution day. After dull trading in the preceding week, Nifty witnessed a surprising move last week, mainly because of short covering. It formed a long-legged, small-body candle. The index failed to close above the 10-week average, even after a 0.80 per cent net weekly gain.[EasyDNNnews:PaidContentStart]

The volumes are higher than last week. The 50-week average acted as support for the third time in seven weeks but broke on Monday. Apart from this, Nifty also closed below the crucial 200 EMA and 200 DMA. The index has taken support at 200 EMA for six times since June 2022. The seventh support is rare. Now, it has broken this key support, too. On the upside, the index failed to move above the 24,770-24,840 zone of resistance to resume the uptrend. It faced stiff resistance and formed a double-top pattern.

After a 5.62 per cent decline from the high of December 5, it again retraced 50 per cent. In a surprising move, it filled the December 19 gap and closed above the 50 DMA but failed to sustain. Since September 27, Nifty has failed to form more than three bull candles. The fall with high volumes is a matter of concern now. So, both 20 and 50 DMAs are in the downtrend. Importantly, the 200 EMA is flat now. Now, the question is whether the index will take support near the previous low (23,263) and move above the 50 DMA (24,115) and close above the 24,226 (January 2 high) or not..

If it is able to close above this swing high, the uptrend may resume and can test 24,414 immediately, which is a bull case scenario. Above this, the prior swing highs of 24,792 and 24,857 are in the target zone. If it tests this zone, the index will form an ascending triangle on a longer timeframe. As mentioned in the previous columns, the dollar-rupee and the dollar index hit a new high. The dollar index broke out of a two-year ascending triangle and hit USD 109.53 last week. The USD-INR is now 85.74 and with the technical set-up now witnessed, it seems it might resume its uptrend.

The Indian foreign exchange reserves declined to USD 640.27 billion, an eight-month low. Apart from this, the US 10-year bond yields rose to 4.60. These factors are negative for equities and may lead to further selling pressure from the FIIs. It is important to match the DII inflow with the FII outflow. Nifty has also formed a five-month-long head-and-shoulders pattern and is closed at the neckline. The index also closed at the rising trend line support drawn from the March 2023 low.

After February 2023, this is the first time that Nifty registered three consecutive negative monthly closings. The earnings season is about to start in a week. Any deceleration on a QoQ basis will also trigger further selling pressure. HDFC Bank’s business update indicated that growth in advances is just 3 per cent on a YoY basis, which is disappointing. Any further disappointing earnings and the commentary will result in a sharp downtrend. The new future and option rules and regulations have impacted participation.

The volumes declined significantly last month and may decline further this month too. For the coming week, watch the 23,460-23,263 zone of support. A move below this will lead to a fall below the 23,000 level and will test 22,850, completing the Category 1 correction of 13 per cent from the top. Further, poor earnings and other factors can lead to a fall towards the July 4 low of 21,281, which is also the head and shoulders pattern target. It is time to be with more cash and wait for a Stage 1 base formation. Focus on stocks forming the Stage 1 base with good earnings.

STOCK RECOMMENDATIONS
GUFIC BIOSCIENCES ................................ BUY ...................... CMP ₹485.00
BSE Code : 509079
Target 1 .... ₹578 
Target 2 ..... ₹615 
Stoploss....₹440 (CLS)

Gufic Biosciences is engaged in manufacturing pharmaceuticals, medicinal chemicals, and botanical products. It is one of the largest manufacturers of Lyophilized injections in India and offers a wide range of products in various therapy areas. It has the largest facility to manufacture Lyophilisation. It has a portfolio of over 100 products. Almost 150 products are in the pipeline for registration. Its bulk drug unit has an exclusive facility for APIs and specialises in anaesthetics, anti-fungal, and antibiotics. It has a presence in more than 20 countries. Gufic Biosciences has partnered with Prime Bio, USA for manufacturing Botulinum Toxin API and formulation.

Technically, the stock is forming a cup pattern for the last eight weeks. The depth of the cup is 21.67 per cent. Currently, the stock is trading just less than five per cent to the prior pivot. Trading above all key moving averages. The 10-week average is acting as support. It is 24.91 per cent above the 40-week average. All the averages are in the uptrend. The MACD showed a bullish signal last week and showed an increased bullish momentum. The RSI is entered into the strong bullish zone. The ADX (29.77) shows a solid strength in the trend. The KST and the Stochastic RSI have been bullish. The Elder impulse system has formed bullish bars. In short, the is trading near the pivot and ready to register a breakout. Buy this stock in the ₹480-505 zone. Maintain a stop loss at ₹440. The short to medium-term target is at ₹578-615.

KRISHNA MEDICAL INSTITUTION LTD (KIMS) ........... BUY ......... CMP ₹649.00
BSE Code : 543308
Target 1 ..... ₹710 
Target 2 .... ₹740 
Stoploss....₹590 (CLS)

Krishna Medical Institution Ltd (KIMS) is one of the largest corporate healthcare groups in Andhra Pradesh and Telangana regarding patients treated and treatments offered. The company offers multidisciplinary healthcare services with primary, secondary, and tertiary care across Tier II and III cities and an additional quaternary healthcare facility in Tier I cities. The company plans to add 2000 beds in the current financial year and plans to have a total 10,000 beds in next three years. The management expects a 50 per cent jump in the revenue in FY26.

The stock is trading at an all-time high. It is in a tight range for the last five weeks. It is 11 per cent above the prior double-bottom breakout level. Its Relative Strength line is at a new high, showing an outperformance compared to the broader market. It is trading above all key moving averages, and all long and short-term averages are in the uptrend. It is 6.09 per cent above the 10-week average and 29.27 per cent above the 40-week average. The MACD is bullish. RSI is in the strong, bullish zone. The ADX (45.44) shows a solid strength in the trend. The KST has been bullish. The Stochastic RSI has given a fresh, bullish signal. The Elder impulse system has formed a strong bullish bar. In short, the stock is at a new high, and a tight area has been formed. Buy this stock in ₹634-650 zone. Maintain a stop loss at ₹590. The short to medium-term target is ₹710-740.

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