Union Budget Will this BUDGET lead markets to New Highs? Budget Special Sectoral Overview (Technical Report)

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1 Union Budget Will this BUDGET lead markets to New Highs? Budget Special Sectoral Overview (Technical Report) Research Team

2 Index Nifty 50 3 Nifty Bank 4 Nifty IT 7 Nifty Auto 10 Nifty Infra 13 Nifty Metal 16 Nifty PSU Bank 19 Nifty Energy 22 ( 2 ) 2

3 Nifty 50 (CMP: 8561) Bullish It has been a year of events on the domestic as well as global front. We witnessed few ups and downs in last eleven months and it seems that the market is at a comfortable position now. First, our markets bottomed out on the Union Budget day last year (i.e. February 29, 2016 after posting a low of ) and this was followed by a massive rally of more than 2000 points on Nifty in merely six months. Due to this relentless up move, some correction was on cards. Finally, events like demonetization, Mr. Trump s victory as US President and US fed rate hike, provided this much awaited correction for our market. Now, with a broader view, the correction was very essential for our market as prolonged bull-markets always consists of healthy corrections. Technically speaking, the Nifty completed its corrective move after precisely testing the 50% Fibonacci retracement level of the entire rally from to Then, after forming a strong base around 7900, few other technical indicators like, the RSI-Smoothened, 5 & 20 EMA Crossover and Parabolic SAR on weekly chart confirmed a resumption of larger degree up trend. Hence, considering a medium term perspective, we expect Nifty to retest all-time highs quite soon and even a move beyond it is on cards. However having said that, due to last one month s strong rally, low hanging fruit is already gone in the market and hence, traders should now be very selective in their stock pickings. In case of intermediate dips, one should use it as a buying opportunity and look to accumulate value buying propositions. In the near term, would now be seen as a strong base and we don t see these levels getting breached soon. We hope this budget propels our market at all-time high soon or may be beyond it. ( 3 ) 3

4 Nifty Bank (CMP: 19515) Bullish Post forming a low at 17607, the Nifty Bank index has rebounded sharply in line with the broader market. If we analyze the higher degree charts, the recent low of coincided with the 20EMA on monthly chart, 89EMA on weekly chart and the low was registered tad below the 38.2% retracement of the previous upmove. The upmove from the above mentioned supports indicate that the longer term trend of the index is up and post a corrective phase within an uptrend; the index has resumed the larger degree upmove. The 5 EMA is above the 20 EMA on both daily and weekly chart and the SuperTrend indicator is in BUY mode on daily, weekly as well as monthly charts, thus hinting towards short term and medium term uptrend. Also, if we observe the momentum readings, the RSI Smoothened oscillator has registered low around the level of 40 (which is usually considered as bull market support zone) and has given a positive crossover with its average. The oscillator is indicating a positive momentum on the monthly charts too. All the above mentioned indicators are hinting towards an uptrend and thus any declines in the index in near term should be used as a buying opportunity. The supports for the index are placed around and and any corrective move towards the mentioned supports should be bought into. In next few months, the trended upmove could lead the index towards the range of ( 4 ) 4

5 Kotak Bank (CMP: 774) Buy on Dips Since the month of May 2009, the stock is in an uptrend which can be noted on the higher degree charts. During this uptrend, 89 EMA on weekly charts have always acted as support for the stock as the prices have closed below the mentioned average only twice in Feb 2011 and Feb 2014 (both were false breakdowns). Post the recent corrective move from `833 to 693, the stock had formed a bullish Hammer pattern on weekly charts near the weekly 89 EMA. Prices have resumed the broader degree uptrend since then. The stock has strong support in the range of ` and thus, traders should look to buy the stock in the mentioned range for a target of `820 in coming 1-2 months. The stop loss for this trade set up can be kept at `720. ( 5 ) 5

6 ICICI Bank (CMP: 269) Buy on Dips Daily Chart Since last seven months, the stock has been oscillating in a broad range of ` During this period, the 200 SMA on the daily chart has acted as support on every corrective decline. The recent price consolidation above the 200SMA has also led to formation of an Inverted Head and Shoulders pattern, which is a trend reversal pattern. However, the breakout from the same would be confirmed only on a close/breakout above the neckline resistance of `274. The recent upmove in last week was support by huge volumes which too is a positive sign. Considering the above technical evidence, traders can buy the stock in the range of ` for a target of ` in coming 2-3 months. The stop loss for this trade set up can be kept at `245. ( 6 ) 6

7 Nifty IT (CMP: 9849) Neutral Last few quarters were not that good for Nifty IT index as it had corrected by more than 25 percent from its high of , registered in March The index took a support around the 50% retracement levels of the entire up move from to , which coincided with the lower end of the Falling Channel on weekly chart. The Nifty IT index formed a Long Legged Doji on both daily and weekly charts at the recent bottom and started rebounding piercingly. The IT index has rallied by around 1000 points in recent past and then consolidated in a narrow range for few sessions. On Tuesday, we witnessed decent correction in IT conglomerates due to news on tightening norms for H1-B visa holders. At current juncture, the index is hovering within the territory of Falling Channel on weekly chart and it is expected to trade within that range in upcoming sessions too. Since, the IT index is trading near to its strong support; long trades may fetch better returns as compared to short sells. Thus, traders should follow stock centric approach within the IT sector. ( 7 ) 7

8 INFY (CMP: 929) BUY The stock has seen decent correction in the recent past and has reached to its strong demand zone of ` On Friday, the stock rebounded sharply from the mentioned support zone and formed a Hammer candlestick on daily chart; which was later followed by the positive momentum on Monday. The mentioned candlestick pattern can be a short term reversal trigger for the counter. Also, the RSI oscillator has turned in upward direction from its support zone of on daily chart, indicating strength in the counter. Looking at the above technical evidences, we are expecting an up move in the stock. Hence, traders are advised to go long in the stock at current juncture and on declines to `915 for a target of `1020 in upcoming weeks. The stop loss for this trade set up can be kept at `880. ( 8 ) 8

9 Just Dial (CMP: 365) BUY Daily Chart The stock has seen decent correction in last few months. Recently, the stock formed a Hammer pattern on weekly chart at the bottom, and started rebounding piercingly. For the first time, after April 2016, the stock has managed to close above 5 EMA on weekly chart. Also, we witnessed a positive crossover of 5 EMA and 20 EMA on daily chart after many months. Recently, the volumes are high in the upmove as compared to corrective moves, indicating buying interest in the counter. The RSI - smoothened oscillator has taken support around 40 levels and started heading northwards on daily chart, indicating strength in the counter. Considering current chart structure, we are pre-empting a formation of Inverse Head & Shoulder pattern on daily chart. Thus, we advise traders to buy this stock at current levels and on declines to `360 for a target of `425 in upcoming weeks. The stop loss for this trade set up can be kept at `335. ( 9 ) 9

10 Nifty Auto (CMP: 9838) Bullish Auto conglomerates have always participated heavily in all the rallies that we have witnessed in last so many years. This time too it did not stay behind as the index has managed to register decent gains in last eleven months. If we meticulously observe the weekly chart, we can see completion of recent corrective phase precisely at 50% Fibonacci retracement level of the previous up move from to This level coincided with the 89 EMA, which acted as a sheet anchor during the month of November Since then the index has rallied more than 12% and is now poised for retesting all time high ( ) quite soon. In fact, considering few indicators like, Parabolic SAR and RSI- Smoothened, the index can even post a new all time high. With a near to medium term view, small dips are likely to get bought into as we see strong base emerging at Considering the risk to reward ratio, traders needs to keep right propositions at right time in order to fetch higher returns. ( 10 ) 10

11 Tata Motors (CMP: 524) Buy on Dips After undergoing a lot of stress during the calendar year of 2015, the stock seemed to have formed a strong base and is in a comfortable position to ride the tide for next few months. The daily chart seems in an uptrend along with the strong structure in monthly time frame. At present, the stock may consolidate for a while; but any dip towards the daily 89 EMA can be seen as a very good buying opportunity. Hence, one can look to accumulate this stock in the vicinity of 89 EMA and 200-day SMA, which we believe would attract lots of trader s attention. The stock has a potential to move towards its 52-week high of ` in next few months. The stop loss can be fixed at `454. ( 11 ) 11

12 Motherson Sumi (CMP: 332) BUY The stock seems to be in a long consolidation phase. Recently, we witnessed some positive traction with healthy volumes. We witnessed a breakout from trend line resistance around `336 on January 27, However, the follow up buying is clearly missing. But, if we look at the higher degree chart structure, it looks encouraging. All key moving averages along with the RSI-Smoothened oscillator are sloping in the upward direction on weekly chart; indicating strength. Thus, despite a strong corrective move, we advise traders to accumulate this stock only on dips towards ` for a target of `372 over the next three to four months. The stop loss should be fixed at `299. ( 12 ) 12

13 Nifty Infra (CMP: 2940) Bullish This sectoral index has underperformed (our benchmark index) miserably if we compare historical performance, especially with a stupendous up move seen way back in However, since last Union Budget, the index has managed to go hand in hand after posting a low of in the month of February Now, if we look at the weekly chart, a formation of Bullish Cap and Handle is clearly visible. At this juncture, prices are quite close to the trend line level of Looking at the recent momentum and rising slope of RSI-Smoothened on weekly chart, we expect the index to surpass this hurdle in the near term. In this scenario, we would expect the index to continue this northward journey at least towards Hence, traders are suggested to keep looking for buying opportunities in its constituents on any meaningful dips. The immediate support for this index is placed at ( 13 ) 13

14 L&T (CMP: 1446) BUY The chart structure of L&T is quite identical to its sectoral index. The stock has completed its corrective phase and has formed a strong base around `1300. Post this, we witnessed a decent up move to form a downward sloping Cup and Handle pattern on weekly chart. At present, the stock is trading around the trend line resistance of `1475, but looking at multiple technical evidences, sooner we expect this breakout to happen in the upward direction. Thus, traders can accumulate this stock from current level to a decline up to `1400 for a target of `1650 over the next three to four months. The stop loss should be fixed at `1300. ( 14 ) 14

15 NTPC (CMP: 172) Buy on Dips Monthly Chart This stock has clearly underperformed over the past few years; but recently we saw some encouraging signs on charts. The stock prices finally broke out in the upward direction from its five years congestion zone in the month of November 2016 after stock prices confirming a monthly close above `158, which was acting as a major hindrance for years. In the course of action, the stock confirmed a Higher Top Higher Bottom on monthly chart along with the positive placement of Super Trend. Considering the risk to reward ratio, traders can look to accumulate this stock only on dips towards ` for a target of `190 over the next three to four months. The stop loss should be fixed at `152. ( 15 ) 15

16 Nifty Metal (CMP: 2487) Bullish Monthly Chart Last few months were phenomenal for metal stocks and as a result, the Nifty Metal index outperformed the broader indices in the year The rally in base metal prices in last 9-12 months worked well for metal stocks as most of the metal & mining counters had seen a splendid rally in this period. The Nifty Metal index, which was making Lower Highs Higher Lows on monthly closing chart (line chart) had given a Triangle breakout and managed to sustain above the same. Also, the set of moving averages (E5, E20 and E89) are placed positively along with Parabolic SAR and RSI smoothened on monthly chart. Since, the metal index has rallied by more than 1600 points from its November 2016 low; a corrective move cannot be ruled out. The Nifty Metal index is poised for a rally towards levels and any correction towards should be used as a buying opportunity. The above bullish view on the Metal index will negate on a close below 9500 levels. Thus, traders are advised not to get carried away by the short term corrections and look for buying opportunities on metal & mining stocks on declines. ( 16 ) 16

17 NMDC (CMP: 144) Buy on Dips Monthly Chart The stock is moving in an uptrend by maintaining Higher Highs Higher Lows on weekly chart. The stock has doubled in last one year and had given breakout from the Falling Wedge pattern on monthly chart. For the first time in last six years, the stock is giving a monthly close above 89 EMA, which is a positive sign for the stock. Also, the RSI smoothened oscillator is moving northwards and had crossed its previous highs, indicating strength in the counter Considering current chart, traders are advised to look for buying opportunities in the range of ` for a target of ` in upcoming 3-4 months. The stop loss should be placed at `115. ( 17 ) 17

18 Tata Steel (CMP: 463) Positive Monthly Chart Since last 15 months, the stock is forming Higher Top Higher Bottom structure and is thus in an uptrend on weekly chart. The stock has given breakout from the Symmetrical Triangle on the monthly chart which can be seen in the above exhibit. The 5 & 20 EMA on weekly as well as monthly charts is indicating uptrend. Also, the momentum reading on the monthly chart is indicating continuation of the uptrend. Considering above technical evidences, traders are advised to use declines in the stock as buying opportunities and trade the stock with positive bias. ( 18 ) 18

19 Nifty PSU Bank (CMP: 3174) Bullish During the month of November, the Nifty PSU Bank index had formed a Doji candlestick on the monthly chart. The mentioned pattern signifies indecision and thus, the index consolidated in the range of during the months of December and January. Although the index continues to consolidate in a range, there are initial signs of the probability of an upmove in the index. Near the lower end of the mentioned range, the index had formed a Doji followed by a Hammer candlestick pattern on weekly chart. Post that, the index has rallied higher and formed a large body bullish candle during last week. The SuperTrend indicator on the weekly charts is in BUY mode and the 5 EMA has given positive crossover to 20 EMA. Also, the RSI Smoothened oscillator on weekly and monthly charts is indicating a positive momentum. Thus, although the index has resistance in the range of , there is higher probability that the index would breach the resistance and rally higher to post a trended move. Only on breach of the lower end of the above mentioned range, the view on the index will be negated. Traders are advised to focus more on stock specific moves within the sector as some of the stocks could fetch better returns than the broader market in near term. ( 19 ) 19

20 SBI (CMP: 260) Buy on Dips Post registering a low around `149 in the month of February 2016, the stock reversed its previous downtrend and formed Higher Tops and Higher Bottoms. After the spectacular upmove, the stock has been consolidating and is showing a time-wise corrective phase. Since there are no signs of trend reversal, traders and investors can accumulate the stock on declines, in anticipation of the resumption of the uptrend post completion of the ongoing consolidation phase. Hence, traders are advised to buy the stock on decline around `250 for a target of `282 in next 3 months. The stop loss for this trade set up can be kept at `232. ( 20 ) 20

21 IDBI Bank (CMP: 77) Buy on Dips Post a consolidation phase of almost nine months, the stock has recently picked up positive momentum and has given a breakout from the falling trendline resistance. The 5DEMA and the 20DEMA have shown a positive crossover and thus, the short term trend for the stock is up. If we observe the RSI Smoothened oscillator on the weekly charts, it is observed that the oscillator has taken support near the level of 40 in the entire consolidation phase since March and it has recently moved above the resistance of 60. The bullish set ups in averages supported with the positive momentum readings indicates that the stock could move higher in next few months. Hence, traders are advised to buy the stock on decline in the range of `74-73 for a target of `83 in next 2 months. The stop loss for this trade set up can be kept at `69. ( 21 ) 21

22 Nifty Energy (CMP: 10674) Bullish Monthly Chart The Nifty Energy index had shown a stellar performance during last year. The energy index, which had a spectacular rally from year 2001 to 2008, was trading in sideways direction from last eight years. The sideways movement has resulted into formation of a Triangle pattern on monthly chart. Currently, we are witnessing a breakout from the mentioned pattern, indicating continuation in the ongoing upward momentum. The moving averages and other technical indicators are placed positively on monthly chart, indicating strength in the counter. Since the stock already had decent rally in recent past and the momentum oscillators are moving in overbought territory on daily and weekly chart; correction of points cannot be ruled out. The index has potential to move towards levels in upcoming months. Thus, we advise traders to look for buying opportunities in its components on declines. ( 22 ) 22

23 GAIL (CMP: 468) Positive Monthly Chart The stock had given consolidation breakout above `450 in the recent past and managed to sustain above the same. Recent up move in the stock was supported by healthy volumes, which further validates the breakout criteria. The set of moving averages (E5, E20 and E89) along with Parabolic SAR are placed positively on both weekly & monthly chart. Since, there is no sign of reversal seen on higher timeframe (weekly & monthly), the stock may continue its upward momentum towards the upper trendline (see exhibit). Looking at the above technical evidences, traders are advised to trade this counter with positive bias as ` range is likely to act as strong support. ( 23 ) 23

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