NIFTY Index Chart Analysis

Nifty may see some short-covering

The September derivatives expiry went great guns for the Indian markets, where benchmark indices bounced back exactly from their crucial support levels. Nifty and Sensex took a U-turn from 9687 and 31081, respectively. The release of macroeconomic numbers counterpoised the prevailing geopolitical tensions and analysts murmuring ahead of the slowdown in the Indian economy. Markets also overcame the status quo maintained by the RBI monetary committee at the policy review. October started off with robust auto sales numbers notwithstanding the cess on fuel as well as the price hike in September 2017. The core sector growth hitting 5-month high levels and manufacturing and services PMI depicting expansion too buoyed the markets into continuing on its upward baby steps. The recent upside, with the Nifty hitting above the 10000-mark, was driven by stock-specific announcements in the frontliners. Going forward, the September quarter corporate earnings report of major companies would majorly drive the markets, kicking off the earnings season with IndusInd Bank on October 12. Seems October heat is still on in the markets! 

The chief benchmark index Nifty took a major support at the 9687 level and gave an obvious bounce-back and surged almost 3.5% from those levels, giving consistent upside with just a single breather in-between. 

The hammer-like pattern with huge volumes along with the 14-period RSI reversal from near to the oversold zone led to a reversal in the Nifty. Now, considering the daily time frame, Nifty has surpassed 61.8% retracement level of the prior sharp downward rally. Nifty has created a Doji pattern, the confirmation of which would lead to a retreat yet again. In that case, we hold 9950-9900 as immediate supports, followed by 9860. However, if the sluggish move just acts as a breather, we hold 10130 as the immediate resistance if Nifty hits above 10063-10073 on a closing basis. Considering the medium-term picture, 10150-10300 would act as the resistance levels, while 9820 followed by 9685 will act as crucial supports. Below 9685, Nifty would give provisional trend reversal.

Nifty (Oct) futures closed at premium of 18.75 points versus a premium of 27.80. On the option front, maximum Put Open Interest (OI) is at 9,800 followed by , strike, while maximum Call OI is intact at 10,000 followed by 10,100 strike. The implied volatility of At The Money options has decreased from 10.06 to 9.60. Overall future and options volumes is currently at 42.56 lakh contracts, with a turnover of Rs 3,65,727 crore. Considering highest OI for October series stand firm at 10,000 Call and 9,800 Put options, market may continue to trade in a range going ahead 
Note: Derivative data is based on October 10, 2017.

STOCK RECOMMENDATIONS

KCP LTD ( BUY )
BSE Code : 590066
CMP Rs. 126.35
TGT 1:Rs. 137 TGT 2: Rs.147
SL Rs. 117 (CLS) 

The stock of KCP is currently trading at RS.126.35. Its 52-week high/low stands at RS.137.95/RS.79 which were made as on April 24, 2017 and November 23, 2016. Considering the daily time frame, the stock has formed an Inverse head & shoulders pattern, though in continuation of an upside. The stock gave a pattern breakout at RS.124-125 levels on October 10. The volumes are justifiable and the 14-period RSI is quoting at 66 which suggests strong momentum in the stock. 

Considering the weekly time frame, the stock retraced up to 61.8% of the prior upward rally and witnessed bounce back for subsequent two weeks. With this, we recommend a Buy in the stock for a target of RS.137 followed by RS.147 and with a stop loss of RS.117.

HIKAL LTD ( BUY ) 
BSE Code : 524735
CMP Rs.227.80
TGT 1:Rs. 248 TGT 2: Rs. 256
SL Rs. 218 (CLS) 

 The stock of Hikal Ltd is currently trading at RS.227.80. Its 52-week high and low stand at RS.256.10/RS.181 made on January 10, 2017 and November 15, 2016. The stock has been trading in a range of RS.200-230 since February 2017. 

The stock has recently given a multiple resistance breakout at RS.230 level, but it could not sustain on a closing basis on the daily time frame. The stock witnessed a pullback followed by a bounce back and has yet again given a breakout. The huge volumes and the 14-period RSI quoting at 61 support momentum going forward. 

Hence, we recommend a Buy in the stock in the range of RS.230-235 on a closing basis for a target of RS.248, followed by RS.256, and with a stop loss of RS.218.