The Reserve Bank of India’s decision to hike the repo rate by an expected 50 basis points on September 30 gave a much-needed boost to the market which had a bad week.
The Nifty not only witnessed a V-shaped recovery after the policy announcement but also went on to reclaim 17,000 with some authority.
But the week was off to a rocky start. On September 26, the market opened with a downside gap amid global weakness. As the day progressed, the Nifty tested the psychological level of 17,000.
In the following session, markets had a positive start which eventually got sold into. Mid-week the Nifty slipped below 17,000 to enter the sub-16,800 territory.
With the smart rally on September 30, the Nifty almost engulfed the entire week's traded down move and restricted the weekly losses tad above a percent.
Markets were extremely oversold but were reluctant to rebound as global weakness persisted throughout the week.
After the RBI policy, the index managed to reverse from a key support zone and if global markets support, the relief may get extended in the coming week as well.
Technically speaking, the daily time frame exhibits a ‘Bullish Engulfing’ pattern and on weekly chart, ‘Dragonfly Doji’ is clearly visible.
The Nifty managed to defend the 20-exponential moving average (EMA) on a closing basis on weekly chart, which is an indication of strength.
A move beyond 17,200 on a closing basis would strengthen the recovery rally. In this case, 17,350 – 17,500 levels cannot be ruled out. On the flipside, 16,900–16,750 has now become a sacrosanct support zone.
We advise traders to keep a close tab on global developments and any favourable cues on this front would provide the much-needed push to the domestic markets.
Till the time important levels are not reclaimed, it's better to stay positive but adopt a one-step-at-a-time approach.
In case of an extended rebound, one can focus on recent beaten-down heavyweight spaces like financials and auto.
Here are two buy calls for the next two-three weeks:
Granules India: Buy | LTP: Rs 345.35 | Stop-Loss: Rs 325 | Target: Rs 370 | Return: 7 percent
The entire pharma space has been bucking the trend for the past two-three trading sessions. With the gargantuan surge on September 30, this stock was the rank outperformer in this space in the week gone by. The stock was in a consolidation phase for quite some time and in the last trading session, it witnessed a decisive breakout from the zone backed by sizable volumes.
The weekly chart structure now looks extremely promising and we recommend buying in the range of Rs 343–340 for a near-term target of Rs 370. Traders can participate by following strict stop-loss at Rs 325.
DLF: Buy | LTP: Rs 356.7 | Stop-Loss: Rs 346.5 | Target: Rs 374 | Return: 5 percent
The entire realty space has seen a massive price disruption in the recent market correction. This being the high beta counter corrected nearly 15 percent in such a short span. Now, it has reached an important cluster of support placed at around Rs 345.
On September 30, the price rebounded sharply to confirm a small breakout from three days of small congestion. If we look at the volume activity, it was higher than average daily volumes.
Considering the positive placement of momentum oscillators, traders are advised to buy for a near-term target of Rs 374. The strict stop-loss needs to be placed at Rs 346.50.
