“The market appears to be in a correction phase with upside resistances now shifting down to 10,650–10,600 levels,” says Mustafa Nadeem, CEO, Epic Research
The Nifty staged a pull back on Tuesday after remaining under pressure for six days due to positive global cues from western markets. A recovery was seen due to positive rebound in sectors which were beaten down heavily in the last couple of days.
Small- and midcaps continued to remain under pressure. On the economic front, rising fiscal deficit, crude oil, bond yields and rupee depreciation versus the dollar kept investors on their toes.
After a consecutive fall for almost six days, a minor recovery was observed due to buying interest in largecap stocks that lifted sentiment momentarily.
Momentum was seen in sectors like metals, with Hindalco and Vedanta remaining in focus. In the automobile space, Tata Motors, Ashok Leyland and Motherson Sumi saw buying at lower levels.
The overall scenario in the market still looks weak since we haven’t seen participation in smallcaps and midcaps, which have been butchered lately. Energy, private banks and fast moving consumer goods were among the decliners.
The market appears in a correction phase with upside resistances now shifting down to 10,650–10,600 levels. Any rebound to these levels may add further momentum to overall bearishness. If we see a closing above 10,650, then the short-term scenario may change. However, that scenario appears tough.
The Bank Nifty is facing resistance at 26,200-26,150 which were its previous important support levels.
Continuous depreciation in the rupee viz-a-viz the dollar and rally in the crude are some factors which are a point of concern for equity markets because it could add pressure to the fiscal deficit.
The overall strategy for momentum players should shift from buy on dips to sell on a rise since we are seeing weaker breadth.
Here is a list of top three stocks that could deliver up to 5-8% return in the short-term:
Mahindra & Mahindra: Buy | Target: Rs 875 | Stop loss: Rs 810 | Return: 5%
The stock is seeing a minor correction in the ongoing primary bullish trend. One correction which was overdue for some time now seems to be over since it has reversed from the pivotal support placed at Rs 810.
We expect the stock to retrace back and turn positive to move higher based on its Wave pattern for a target of Rs 875 and a stop loss placed below Rs 810.
LIC Housing Finance: Buy | Target: Rs 520 | Stop loss: Rs 465 | Return: 8%
It is seeing a base formation at lower levels with prices seeing accumulation and showing positive divergence. We expect the Rs 465 zone to provide a short-term support to the stock but it can move higher towards Rs 520 levels which should be your next target.
Zee Entertainment Enterprises: Buy | Target: Rs 598 | Stop loss: Rs 550 | Return: 6%
The stock has made a double bottom formation on the daily chart while long-term support trendline drawn from previous lower troughs seems to provide a short-term support for prices. We expect the stock to inch higher with an upside target of Rs 598.
Havells India: Buy | Target: Rs 578 | Stop loss: Rs 535 | Return: 5.6%
The stock has reversed the trend to the upside after it makes an engulfing pattern on daily charts and pairing previous week losses. Buying momentum picked up at lower levels and took the stock to higher levels. We expect this momentum to continue with the target of Rs 578.
Disclaimer: The author is CEO, Epic Research. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
