NIFTY Index Chart Analysis

The fall was sharp and impulsive two weeks ago and Nifty has undergone a counter-trend consolidation for the past two weeks. For the last six trading sessions, the index traded around the 61.8 per cent retracement level and was unsuccessful in closing above it. In fact, Nifty is struggling to surpass this important resistance to reverse the trend on the upside. The level of 19,485 has become a strong resistance level as it was tested several times. Only a close above this crucial level will give more strength to the pullback rally. It has to close above the prior swing high of 19,884 to reverse the trend. 

Below this, all the pullbacks are considered counter-trend consolidations. The current price pattern looks tired after a 3.69 per cent rally, showing first signs of exhaustion and a probable reversal. In any case, if the index closes below 19,399 (20 DMA), we will get the confirmation of the resumption of a downtrend.

Importantly, Nifty tested the November 2022 high and completed the throwback. It is also the rising trend-line drawn from the March 2020 low, which is at the same level. Against this background, the recent major low of 18,998-18,840 will be the key support.Below this zone, Nifty will correct at least 13 per cent from the high at 17,660. In any case, if it extends the fall it can test the 23.6 per cent retracement (17,262) of the March 2020 low at 7,526 to a recent high of 20,270. Nifty corrected by just 6.85 per cent from its lifetime high. Expect the correction to extend to 13 per cent in the next 2-4 months, which is a Category 1 correction. Most of the major corrections in the world markets were Category 1 corrections. If Nifty closes below the recent swing low, the market will test the 17,600 level in the medium.

The downtrend or the correct decline will end before January 2024 and thereafter, the index may consolidate for two months, which will form a base. A breakout or a breakdown will be at the end of March 2024. A breakout takes us straight to the levels of 21,500 and 22,300 within one year from the breakout. If the breakdown happens, expect a 25 per cent correction from the lifetime high and register a Category 2 correction. The probability for Category 2 correction will depend on the general elections’ outcome. The market will sense at least 2 -3 months before the outcome. 

So, we can expect a breakout in March 2024. The volatility index, India VIX, is usually around the zone of 10-11. The prolonged low VIX regime will be a threat to the markets. During the previous week, it moved in huge swings, as did the benchmark index. Any small spike in the VIX will affect the pullback. The global markets are also reacting from their resistance points. The weekly RSI is hovering at around 55 and not showing any divergence. The MACD line is still below the signal line. The ADX line is declining and the +DMI line is unsuccessful in moving above the –DMI. It shows that the trend needs to strengthen further.

Importantly, the index is still 0.60 per cent below the 50 DMA. The 20 DMA is in a downtrend, even after the index has traded above it for the last six days. The volumes have been declining consistently since the beginning of the pullback, barring one or two days. No sector is in a position to lead the market currently. As the earnings’ season is almost ending, more stock-specific activity will continue. Meanwhile, the real estate sector broke out of a 14-year consolidation and closed above 23.6 per cent of the prior downtrend. This sector looks promising for the next two years. Focus on good earnings’ growth stocks and leaders in the sector.

STOCK RECOMMENDATIONS

KPI GREEN ENERGY LIMITED ................. BUY .............. CMP ₹1,048.50
BSE Code : 542323
Target 1 .... ₹1,220 
Target 2 ..... ₹1,280 
Stoploss....₹934 (CLS)

Formerly known as KPI Global Infrastructure Limited, KPI Green Energy Limited is the solar and hybrid vertical of KP Group. It is a leading solar and hybrid powergenerating company. The company is focused on providing solar and hybrid power through different business verticals and is engaged in developing, building, owning, operating and maintaining solar and hybrid power plants as an independent power producer (IPP) and as a service provider to captive power producers under the brand name ‘Solarism’. Its cumulative capacity is 313 MW. Technically, the stock has broken out of a 10-week consolidation with the highest volume in recent times. It closed at a lifetime high. Its relative price strength is at a new high. The stock meets all CANSLIM investing criteria. It is placed well above the long-term averages. All the short-term and long-term averages are in an uptrend. The moving average ribbon is also on the uptrend. The weekly MACD has given a fresh bullish signal. The RSI is in a strong bullish zone. The KST and the Stochastic Oscillator have been in the bullish mode. It has cleared all resistance as it is in uncharted territory. The stock has not formed a lower low on the long-term chart, and it is in a strong bullish trend. In short, the stock has broken the bullish breakout. Buy this stock above the ₹1,020-1,060 zone. Maintain a stop loss at ₹934. The short-term to medium-term target is at ₹1,220-1,280.

AJANTA PHARMA LTD. ........................ BUY .................... CMP ₹1,851.15
BSE Code : 532331
Target 1 ..... ₹2,040 
Target 2 .... ₹2,100 
Stoploss....₹1,740 (CLS)

Ajanta Pharmaceuticals is a speciality pharmaceutical company providing quality medicines. It has presence in over 30 countries. The company owns 500+ brands across the therapeutic segments. About 70 per cent of its revenue comes from the cardiac and ophthalmology segments. During the last six months it launched 10 new products, of which four products are first on the market. The company has seven state-of-the-art manufacturing units in India. One unit manufactures active pharmaceutical ingredients (APIs), primarily for captive consumption. Its research and development has strong capabilities in the finished product development of different dosage forms by designing robust formulations. Technically, the stock is trading at a 13-week flat base pivot level. It is also near its lifetime high. For the last three weeks, the volumes were above average. Its relative price strength (RS) rating is at a new high, showing an outperformance compared to the broader market. It is well above all the medium-term and long-term averages. The stock is 7.03 per cent above the 50 DMA and 28.53 per cent above the 200 DMA. The weekly MACD has given a fresh bullish signal and the RSI is in a strong bullish zone. It is trading above the MAMA, FAMA band and Ichimoku cloud. The Stochastic RSI has given a fresh bullish signal. As the stock is at a new high, it has cleared all resistance, and all the indicators are with bullish bias. In short, the stock is at the pivot level. Buy this stock above the zone of ₹1,850-1,885. Maintain a stop loss at ₹1,740. The short-term to medium-term target is at ₹2,040-2,100. 

*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 November 13, 2023)

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.