NIFTY Index Chart Analysis

Nifty lying indecisive for now, breakout likely on either side 

The interest rate hike by the RBI, followed by the US Fed’s second consecutive rate hike, drove Indian stock markets downhill in the last 15 days. The ECB in its policy hinted at a delay in rate hike, may be till the end of the first half of 2019, despite a pick-up in inflation and wages. Further, it said it would halt it bond-buying carried through the decade. All the attempts aimed at tightening liquidity by the major world economies are weighing on the markets. Otherwise, Indian stock markets have been reflecting justifiable macro-economic numbers. The pick-up in auto sales, followed by the subdued PMI numbers and positive IIP  growth brought in some volatility in the markets. The major events of the WPI and CPI hitting multi-month highs in the wake of high crude oil prices too refrained the markets from gaining ground and vindicated the RBI’s stance. The RBI is looking forward to another rate hike in December ahead of bigger inflation number and India retaining top spot as the fastest growing economy. However, this needs to be reflected positively in the corporate earnings for Q1FY19, as against the mixed results in Q4FY18 

Apart from the benchmark indices, which are struggling in the midst of decisive resistance and support breakouts, the broader markets are yet to pick up the momentum and are striving at the downside. Sectorally, IT and pharma sectors are more or less consolidating at their peak levels on account of lack of triggers, apart from the US plans to impose 10% tariffs on additional USD 500 billion worth of items. The Commodities, CPSE, Infra, Metal, PSE and Media indices are tilted downwards, while the Energy and NBFC indices are heading northwards. A major trend reversal to bullish is seen in Pharma and PSU Banks indices, which have bottomed out for now and have also breached prior resistances. 

Coming back to our benchmark index Nifty, it is trading in-between the symmetric triangle-like pattern on the daily time frame. Nifty had attempted to breach its downward sloping trendline breakout at 10,860 on June 13, but it could not sustain on a closing basis and corrected near to the 50% retracement of the prior upward rally from 10,551 to 10,893. The volumes are justifiable but the momentum oscillators quoting below 55 depict lack of momentum in the markets. On the weekly time frame, Nifty is seen correcting after three consecutive upticks. 

Going forward, in case Nifty hits below 10,720-10,680 levels, we hold 10,630, followed by 10,550, as immediate supports. Below 10,630, Nifty will witness an upward sloping trendline breakdown. On the upside, the levels of 10,800-10,830 will act as the immediate resistances, where 10,800 is near to the 50% retracement of the downward move from 10,893 to the recent low of 10,701. The levels of 10,890-10,930 will act as subsequent resistances. Nifty is lying indecisive and hence it is necessary to predict the direction breakout on either side.

STOCK RECOMMENDATIONS 

PERSISTENT SYSTEMS.......... BUY......... CMP Rs 809.75 

BSE Code : 533179
Target 1 .. Rs 877
Target 2 ..... Rs 912
Stoploss....Rs 737 (CLS) 

The stock of Persistent Systems is currently trading at Rs 809.75. Its 52-week high and low stand at Rs 877.50/ Rs 590 made on February 27, 2018 and September 13, 2017, respectively. Considering a weekly time frame, the stock had given a prolonged rounding bottom breakout at Rs 749 during January 12 week and hit 52-week high. However, the stock gave a shooting star reversal and dropped sharply for five weeks, hitting much below the trendline level of the rounding bottom. The stock bounced back from Rs 658 nearly up to the 52-week high at Rs 867 level, followed by a correction of up to 61.8% retracement of the bounce, again followed by a bounce up to Rs 844 level in the recent past. Meanwhile, the stock hit downward sloping trendline level on the daily time frame formed by joining the 52-week high levels, 867 and 844. The stock is trading above all its major EMA levels, starting 5-day to 200-day. The 14-period RSI is quoting at 58 tilted northwards and volumes are relatively growing. We recommend a BUY. 

MAHINDRA CIE AUTOMOTIVE......... BUY....... CMP Rs 273.45 

BSE Code : 532756
Target 1 ..... Rs 298
Target 2 ..... Rs 314
Stoploss....Rs 249 (CLS) 

The stock of Mahindra CIE is currently trading at Rs 273.45. Its 52-week high/low stand at Rs 274.75/ Rs 199.20, which were made as on June 19, 2018 and February 9, 2018, respectively, portraying sharp upside in the recent past. Before hitting the recent 52-week high, the stock had made its previous 52-week high near Rs 270 level with a double top on Dec 26 and 27, 2017. Thereby, the stock gave a sharp fall near to the level of Rs 199, with a double bottom on February 6 and 8. Thereafter, the stock has surged gradually till date, forming a kind of rounding base. The oscillators are lying in the overbought zone, but the stock has a tendency to give upside while in this zone also. The volume growth in the recent couple of days too suggests momentum. After the consolidation of last four months, the stock has given a sharp upside in the current month, hitting above its multiple monthly resistance zone of Rs 258-270. We recommend a BUY.