Relief rally fizzles out; Pharma becomes the safe haven space
During the previous week, our markets showed tremendous resilience and in the process, managed to give smart recovery of more than 15% from the lows of 7511.10. Things started to look brighter but, at present, we are in an abnormal phase and in such kind of health crisis, it would be difficult for markets to give extended relief moves. Last week, the proceedings started with a strong cut on Monday and despite some pull back on the following session, markets once again resumed its downward trajectory. Eventually, the truncated week ended with nearly seven per cent cut from the previous weekly close.
As we all know, markets are clearly driven by fear and sentiments, and till the time, things with respect to coronavirus pandemic does not subside, the pain is likely to stay in the market. Traders are advised not to create aggressive bets especially leveraged positions in such kind of environment. This week, the INDIA VIX cooled off considerably from 12-year high, which is the only sign of relief; because it indicates a possibility of reduction in volatility and thereby shrinking the overall range in the market. It would be important to see how things pan out over the weekend with respect to coronavirus.
As far as levels are concerned, 8,000 followed by 7,800 would be seen as immediate supports; whereas on the higher side, if market has to see some relief, the Nifty needs to surpass 8,300-8,400 convincingly. In the recent past, financial stocks have been facing terrible sell-off and this week too, we saw tremendous underperformance from this space. Moreover, it would be unfair not to mention the stupendous rally in Pharma stocks on the last day of the week. It has been the safe haven space for traders/ investors in the recent meltdown and now it increases the possibility of the multi-year pain ending for this basket.
Stock recommendations:
NSE Scrip Code – SUNPHARMA
View – Bullish
Last Close – Rs 375.95
Justification – The entire Pharma space has been the knight in the shining armor for market participants in the recent carnage. This laggard sector has not only showed reluctance to fall but also gave stupendous rally in the last few sessions, especially on Friday. It would be too early to comment on this, but we may see early signs of revival for this basket after the underperformance of nearly five years. ‘SUNPHARMA’ gave a decisive breakout from key short term moving averages along with sizable volumes. Thus, we recommend going long for a positional target of Rs 404 in the coming days. The stop loss can be placed at Rs 357.
NSE Scrip Code – Just Dial
View – Bullish
Last Close – Rs 299.50
Justification – This stock has corrected sharply in the recent turmoil and in the process, posted its all time low of 250 in the last week of March. Looking at past few days’ price action, it appears that the correction has halted for a while. On Wednesday, we saw first sign of strength as prices managed to close above ‘5-Day EMA’ for the first time in last few weeks. In addition, the RSI-smoothened oscillator has confirmed a positive crossover in extreme oversold territory. Hence, we expect the stock to give some relief in next few days. Although, the market environment does not suit positions on the long side, we are advising this stock with strict stop losses. One can look to buy for a target of Rs 342 in the coming weeks. The stop loss can be placed at Rs 284.20.
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Disclaimer: The author is Chief Analyst- Technical & Derivatives at Angel Broking. He may have positions in one or all of the above mentioned stocks. Views expressed are his own.