NIFTY Index Chart Analysis

Nifty continues to scale new highs, rallying about 250 per cent from the low reached during the corona virus pandemic. The current bull run since March 2023 is the sharpest one, with no major corrections. In the last 18 months, the benchmark index has climbed over 56 per cent. During this period, only one of 6.85 corrections occurred in October 2023. Currently, India’s market capitalisation has risen to USD 5.71 trillion. In any terms, the current market condition is in a strong bullish trend. In any timeframe, there is no weakness visible.

Several clues show that the trend is overstretched. However, all the smaller declines were taken as opportunities for fresh buying. Several bearish patterns failed to get confirmation for their implications. The seasonality of September’s weakness for the past 15 years did not repeat this year. The index has closed above the prior bar’s high in the last four months and three weeks. This shows solid strength in the trend. Interestingly, the volumes have been declining for the last three months.

We mentioned a year ago that Nifty may test 26,276 by the first quarter of FY 2025-26. This target is a 100 percent extension of the March 2020 to October 2021 swing. This first phase of the rally is 19 months old. After 20 months of consolidation, the index broke out and has now exactly met its target of 26,277 on Friday. It has met all the pattern targets and is in uncharted territory. The uptrend remains very strong and shows no signs of weakness or retracement. If the declines are limited to less than 5 per cent and the buying interest continues, the index may test 27,652 by January 2026.

Before that, 26,500 and 27,000 will be the immediate resistance. However, Nifty is now 7.66 per cent above the 20-week average. Earlier, when it deviated by 8 per cent during December 2023, the index traded sideways for at least seven months. This has led to the weekly Bollinger bands’ contraction and the mean reversion. Sooner or later, the index must witness a mean reversion. The daily Bollinger bands also expanded to the maximum, and the index is now 725 points above the 20 DMA, which is the mean.

The monthly RSI (83.92) has been in the extreme zone of above 80 for the last three months. The weekly RSI (76.75) and the daily RSI (76.44) are also in an extremely overbought condition. Earlier, when the RSI reached near the 80 zone on the weekly time frame, it developed a negative divergence and resulted in a significant correction. The monthly MACD line is at an all-time high and, far away from the zero line, is an indication of being extremely overbought. In any case, if profit booking starts and declines below 25,847, it will be painful.

Like the rallies, the decline also will be a sharper one. As mentioned earlier, the FMCG, automotive and IT sectors outperformed and hit a new high. These sectors continue to outperform. Consumer durables have entered into the leading quadrant on the RRG chart and may outperform. The realty and metal indices are picking up their relative strength and momentum. Many stocks in these sectors are near their pivots. Watch them for a buying opportunity. The PSU banks are still lagging.

Though Bank Nifty is at a lifetime high, its relative strength and momentum are declining, so stay cautious in this sector. The profit booking in private sector banks may hurt. In a nutshell, the trend is stronger, and there is no other option but to ride the trend. Select stocks that are breaking out of the solid weekly bases and have higher relative strength. The earnings season will begin in the next two weeks. The earnings momentum must continue to sustain the trend intact. Any major disappointments will dampen the sentiment and result in redemption from the market.

STOCK RECOMMENDATIONS

DLF LIMITED ...................................... BUY ........................ CMP ₹913.70
BSE Code : 532868
Target 1 .... ₹1,020 
Target 2 ..... ₹1,084
Stoploss....₹855 (CLS)

DLF is India’s leading real estate developer with more than seven decades of history. The company has developed more than 178 real estate projects and an area of over 349 million square feet. It has 220 million square feet of development potential across residential and commercial segments and has delivered 125 million square feet since its IPO. Its rental business projects cover 40 million square feet, the highest total for any real estate developer in the world. It has registered double-digit growth in the rental business.

The portfolio is to grow two-fold in the next 4-5 years. For the current financial year, the company is planning to launch 12.8 million square feet, which has sales potential of ₹42,000 crore. It already has ₹6,404 crore new sales booking by the end of Q1. Technically, the stock has broken out of a 21-week consolidation. The higher volume shows an increased buying interest. It is trading above all the long-term and short-term averages. It is trading 8.07 per cent above the 40-week average and 7.08 per cent above the 10-week average.

All the averages are in an uptrend. The weekly MACD has given a fresh bullish signal. The RSI has shifted its range into a strong bullish zone. The Elder impulse system has formed strong bullish bars. It is above the Anchored VWAP resistance and above the Ichimoku cloud. The Stochastic RSI is in the bullish mode and the KST is about to give a bullish signal. The +DMI just crossed above the –DMI and this is a positive signal. In short, the stock has registered a bullish breakout. Buy this stock above ₹915. Maintain a stop loss at ₹855. The short-term to medium-term target should be ₹1,020 to ₹1,084.

JTL INDUSTRIES ................................ BUY ........................ CMP ₹228.70
BSE Code : 534600
Target 1 ..... ₹265
Target 2 .... ₹280 
Stoploss....₹208 (CLS)

JTL Industries has established a strong reputation as a specialist in electric resistance welded (ERW) black pipes. Over the years, JTL Industries has strategically expanded its product portfolio to include hot-dipped galvanised steel tubes, solar module mounting structures, and large diameter steel tubes, serving diverse industries such as agriculture, water distribution, solar energy, heavy vehicles, construction and core infrastructure. It is enhancing its pan-India distribution network while also increasing its global presence to increase its share of the value-added portfolio mix.

The stock of JTL Industries is currently trading within a consolidation pattern. A significant aspect of this pattern is the recent formation of a second trend line within the pattern, increasing the likelihood of an imminent breakout. A second ascending trend line has formed within the pattern, creating an even tighter price range. This signals increasing pressure within the pattern, typically a sign of imminent resolution in the form of a breakout. This convergence indicates that the bulls are gaining strength and are ready to push the stock above the resistance level. There has been noticeable volume increase on days when the stock closes higher (green candles), which is a positive sign of strong buying interest. This indicates accumulation by buyers, strengthening the case for a bullish breakout. Buy this stock at the current levels for a target of ₹265 and ₹280 with a stop loss of ₹208.

*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 September 27, 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.

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