Nifty would trade in 11,400-11,700 range; positive on auto, private banks

Reliance Securities

Nifty failed to scale a new high despite strong GDP numbers and witnessed sharp profit booking as surge in crude price and weakness in the rupee continued to put pressure on broader markets.

Bank Nifty and FMCG sector led the fall at the start of the week, while IT, pharma and metals gained some positive momentum on the back of strong earnings growth. Weakness in the rupee acted as a strong opportunity to the export sector.

For the week, Nifty ended in the negative by 0.8%, while midcaps and small caps declined by 1.8% and 2%, respectively. Among sectors, Bank Nifty declined by 2.1% with sharp cut in PSU banks by 5.6%. Pharma, IT and metals gained 2% on average, while energy gained 1% outperforming the broader markets. India VIX gained 11% and a breakout above 14 levels would create some volatility over the next few weeks.

Nifty turned negative after six weeks and going ahead we believe markets would trade in the 11,400-11,700 levels range over the next few weeks as there are no major events lined up.

Crude prices and the rupee would be closely watched at current levels as they are trading at important resistance levels after a sharp move in the past few weeks.

Among sectors we continue to remain positive on auto and private banks. One could look at pharma, but should wait for declines as the pharma index has strong resistance near to its 200-week average placed at 10,750 levels

TVS Motor Company | CMP: Rs 590 | Recommendation: Buy | Target: Rs 685 | Stoploss: Rs 545 | Return: 16 percent

The stock reversed after taking support of its 50 percent Fibonacci Retracement level of prior up-move (Rs 179-793) and given breakout from intermediate falling trend line thereafter.

Due to recent recovery in the stock, the key technical indicators on the weekly scale reversed from their lower levels and given positive cross-over.

As per the current weekly set-up, we believe that the stock is on a verge of turnaround and will recover prior damages.

Thus long position can be initiated here for the target of Rs 685 with a stop loss of Rs 545.

RBL Bank | CMP: Rs 610| Recommendation: Buy | Target: Rs 665| Stoploss: Rs 575 | Return: 9 percent

The stock has formed Morning Star Patten around prior resistance line (as per the change of polarity principle prior resistance turned as a support point) and snapped four days old falling trend.

Reversal in RSI from its neutral line-50 and positive cross-over in Stochastic around its oversold zone are confirming turnaround in the stock.

On the higher side, prior high connecting trend line will cap the up-move.

In case of any decline, recent swing low will act as a strong reversal point.

Thus long position can be initiated here for the target of Rs 665 with a stop loss of Rs 575.

Hindalco | CMP: Rs 243| Recommendation: Buy | Target: Rs 265| Stoploss: Rs 230

The stock has given breakout from Inverted Head and Shoulder and rose to 2 and half months high.

The key technical indicators are positively poised above their neutral line, signaling strength in the stock.

We believe the stock will complete the bullish pattern and will visit the prior swing high.

Thus, long position can be initiated here for the target of Rs 265 with a stop loss of Rs 230.