RIL, HDFC twins tanked Nifty 450 points last week; here’s how to trade them

We witnessed a vertical fall in the Nifty last week after breaking below the level of 11,630. It fell more than expectations due to a decisive break down from 11,550.

All sectors closed about 2 percent lower except for FMCG and technology. Based on the broader formation of the market, it would now be a very tough task for Nifty to cross 11,760, before the outcome of election results.

On the other side, based on sell-off seen in stocks, which is nearly 80 percent of the previous up move, we could expect a sharp bounceback or a pullback from 11,200-11,150.

Of the total losses of 454 points over the previous week, 50 percent of it came from only five stocks and out of these five stocks, one stock has weight of 11 percent in the Nifty.

Shrikant Chouhan

Senior VP, Technical Research|Kotak Securities

• 'Short-term traders can sell Nifty below 11,630 with stop loss at 11,700'

• 'Traders must design an ‘options strategy’ one day prior to election results'

• 'Probability of Nifty hitting 11,770 is higher now; auto, commercial banks look good'

In the current week, we should study these stocks on charts on a weekly time frame.

Reliance Industries:

The most damaging stock was Reliance industries, which was down by 11.19 percent. It contributed 126 points to the entire erosion of 454 points seen in the Nifty for the week ended May 10.

Technically, as per line charts, it was sustaining comfortably above the level of Rs 1,275 since March 2019 for almost eight weeks; however, in the previous week, Reliance has wiped out all the gains and closed at Rs 1,251.

Such combinations result in either consolidation or lower top, lower bottom formation. For the week, it could find major support between Rs 1,250 and 1,200. A rebound could last up to a minimum Rs 1,320 and a maximum up to Rs 1,350.

HDFC Bank and HDFC:

HDFC twins have eroded 65 points jointly, which seems marginal; however, they impact the broader sentiment of the market. Investors and traders perceive it as “something wrong in the market” because long-term investor and positional traders are also worried.

However, recent erosion is still within the limit and further drop could lead to more worries. Technically, HDFC has major supports between Rs 1,880 and 1,860. On the higher side, Rs 1,970 and Rs 2,000 would be major hurdles.

ICICI Bank and Bajaj Finance:

The other two stocks, which have impacted the sentiment by nearly 50 points are ICICI Bank and Bajaj Finance. Technically, ICICI Bank is struggling to close above Rs 410.

Last week, ICICI Bank dropped below the level of Rs 380, however it managed to close at Rs 385. Further fall could be negative for the stock.

Finally, Bajaj Finance is exhibiting weakness and exhaustion on charts. Some more weakness is not ruled out up to Rs 2,850-2,800.

Fresh buying would emerge only if it is able to surpass Rs 3,200. Technically, it might attract selling pressure or liquidation of long positions at Rs 3,050/3,070 levels.

The author is a senior VP (Technical Research), Kotak Securities.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.