Technicals

SPOT NIFTY: Indian stock markets seemed to have discounted the event of RBI's June policy review. The markets bounced back the moment RBI announced interest rate hike in the afternoon session of June 6 and has continued to gain so far. The uptick in the macroeconomic numbers might have counterbalanced the RBI news, wherein the auto sector posted robust sales numbers for May 2018. The Manufacturing and Service PMI eased a bit, but sustained above the expansion level of 50. However, the prevailing Brent crude prices and rupee depreciation, along with subdued reaction of banks on RBI decision, refrained the markets from gaining further. The remaining macro numbers, monsoons and the corporate earnings for June 2018 are expected to direct the markets going forward.

Nifty remains indecisive for now, where the prices are trailing in-between the trendline breakouts on both sides. The levels of 10880 and 10530 act as the trendline resistance and support levels, respectively, for now. Nifty bounced back from above the 10550 level and surged for two consecutive days to beat its psychological resistance at 10770. The price rise was supported by rising volumes and the 14-period RSI positive crossover, which is now quoting at 58. Hence above the level of 10770 on a closing basis, we hold 10880 followed by 10930-10955 as the resistances . However, if it is just a short-covering, Nifty may see a retreat yet again. In that case, we hold 10715-10650, followed by 10550-10515, as the supports.

NIFTY DERIVATIVES: The Indian Volatility Index (VIX), a gauge for market's short term expectation of volatility, gained 1.75 per cent and settled around 12.77. Nifty June 2018 futures closed at 10761 at a discount of 7.35 points over the spot closing of 10768.35. Nifty July 2018 futures closed at 10771.20 at a premium of 2.85 points over the spot closing of 10768.35. The Nifty Put-Call Ratio (PCR) Open Interest-wise stood at 1.20 for June month contract. Among Nifty calls, 10,800 Strike Price from the June month expiry was the most active Call. Among Nifty Puts, 10,700 Strike Price from the June month expiry was the most active Put. For the June series, the maximum OI outstanding for Calls was at 11,000 strike price and that for Puts it was at 10,600 strike price.

LEGEND : 
EMA - Exponential Moving Average
MACD - Moving Average Convergence Divergence
RSI - Relative Strength Index

BSE Code: 500113
Target 1: Rs.89 Target 2: Rs.92
Stoploss: Rs.76 (CLS)

Current Observation: The stock, after registering a swing high of Rs 98.30 on February 12, 2018, entered into a correction phase. The correction halted near about the level of Rs 67. The stock formed a base around Rs 67-68 and, on the upper end, it faced resistance around Rs 80.50-81.50. This led to the formation of a rectangle channel.

At present, the stock has witnessed a breakout of rectangle channel, along with robust volumes. The stock is trading above its important short term moving average, i.e. 21-DMA, which is positive for the stock.

The 14-period RSI on the daily time frame is in the bullish zone and in the rising trajectory. 

The level of Rs 76 is likely to act as a strong support and this could be maintained as a stop loss for long positions. On the upside, the stock is likely to touch the levels of Rs 89-92.

Conclusion: Considering the breakout of the rectangle channel along with robust volumes and the stock trading above its important short term moving averages, we recommend buying this stock for a target price of Rs 89-92, with a stop loss at the level of Rs 76.

We had recommended our readers to buy the stock of Sundram Fasteners Ltd at Rs 631.90 in issue no. 33 (dated June 04, 2018). The stock witnessed a follow-up move and went on to touch a high of about Rs 649. However, it failed to sustain at higher levels as sell-off was seen in the broader indices and this stock too slipped lower. We had recommended exiting this stock at Rs 589 through our SMS service on June 5, 2018.