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Sell-off continues post minor relief

Post the Budget announcements, our market looked extremely depressed as it triggered sell-off in some of the marquee outperformers as well.

Towards the fag end of the previous week, this selling somehow got arrested and our markets started attempting to give some recovery. The follow-up of this recovery mode was seen at the start of the week gone by and in the process, Nifty managed to retest the 11,700-mark. However, no relief on the Foreign Portfolio Investor (FPIs) surcharge in the midweek parliamentary session triggered yet another bout of sell-off and in last two days, the index completely took a nosedive to breach all recent crucial supports.

Recently, the index first breached its crucial swing low of 11,640 and then gave a weak recovery towards 11,700. Now, due to the selloff in the last two days, the Nifty has completely filled its upward gap area created post the exit poll numbers and importantly is on the verge of confirming a breakdown from the multi-month trend line support of 11,400. To worsen this, banking index tanked below 30,300 and midcap index got hammered once again to activate the bearish scenario. If we look at the price structures, the picture looks extremely scary. Going ahead, if we do not get any relief with respect to recent concerns, then traders should ideally prepare themselves for further decline towards 11,250 - 11,108.

The entire trader/ investor community is frustrated with the kind of underperformance we have seen for such a long period of time from the broader market. If things continue to remain this way, a lot of market participants would finally give up and opt to move out of the markets. At this juncture, traders should strictly avoid aggressive positions and should ideally look to accumulate marquee names in a staggered manner with a slightly longer horizon.

Stock Recommendations:


View –   Bearish

Last Close –   Rs 248.85

Justification – Since May lows, this stock has already given a stupendous rally and since the Budget day, we are witnessing some nervousness in the counter. Due to Friday’s fall, the daily chart now depicts a breakdown from an ‘Inverted Flag’ and since there is no major support visible before 235 – 230, we expect this downward move to continue for a while. Hence, we recommend selling this counter on a minor pull back towards 251 to make it a better risk reward proposition. An immediate target to watch out for would be around Rs 240 - 235 and the stop loss should be fixed at Rs 256. 


View –   Bullish

Last Close –   Rs 106.25

Justification – It was good to see that some of the ‘PSU’ stocks were not participating in the mayhem the broader market has seen over the past couple of days. ‘Engineers India’ is clearly one of them. It was bucking the trend and eventually managed to close in the positive territory. If we just take a look at the broader picture, we can see this stock finding support around the ‘multi-month’ trend line level of 104 and now on the daily chart, we can see a formation which resembles a ‘Spinning Top’ pattern. Not a major trend reversal pattern; but at least it can help this stock give some recovery in the coming week. Thus, traders can look to initiate longs at current levels for a small target of Rs111 and the stop loss should be fixed at Rs103.80. 

Disclaimer: The views expressed are the analyst's own. He may have positions in one or all of the above mentioned stocks.