Technical indicators signal consolidation ahead; prefer index majors, say experts

The Indian market ended in the green enduring bouts of volatility on December 19.

Initially, weak global cues were weighing on the sentiment but buying interest in the select index majors gradually pushed the benchmark higher as the session progressed. Besides, firm European markets further added to the positivity.

Sensex ended at 41,674, up 0.28 percent while Nifty settled at 12,260, up 0.31 percent. BSE Midcap and Smallcap indices closed 0.17 percent and 0.06 percent up, respectively.

Ajit Mishra, VP – Research, Religare Broking said the benchmark indices are showing tremendous resilience at the higher levels. However, the continuous underperformance of the broader indices is still a major concern.

He added that Nifty has reached closer to its immediate hurdle at 12,300 and is likely to see some profit-taking or consolidation in the near future. Considering the market scenario, he advised keeping a few shorts also and preferring index majors and quality midcaps for trading and investment.

Despite premium valuation, the market is touching higher highs led by foreign inflows due to convictions of consistency in performance.

Vinod Nair, Head of Research at Geojit Financial Services believes the Union Budget is likely to be crucial for the market on account of new policies to attract investments. He said that investors are factoring a possible slippage in fiscal deficit due to the slow pace of tax collection. The broader market’s performance is yet to match with the main indices. The progress in global sentiment will help risk-taking abilities of investors which will extend the liquidity to broader indices.

The Indian rupee depreciated by 6 paise to close at 71.03 against the US dollar as a steady rise in crude oil prices weighed on investor sentiment.

On the institutional front, foreign institutional investors (FIIs) bought shares worth Rs 739.43 crore, while domestic institutional investors (DIIs) sold shares worth Rs 493.95 crore in the Indian equity market on December 19, provisional data available on the NSE showed.

Big news: RBI Policy minutes

Reserve Bank of India (RBI) Governor Shaktikanta Das called for close coordination between measures taken by the central bank and the government in order to address the current slowdown in the economy, according to the minutes of the December policy review meeting.

While there is policy space for a future rate reduction, the cuts need to be appropriately timed to ensure optimal impact, he added.

The RBI, on December 19, released the minutes of the Monetary Policy Committee (MPC) meeting held on December 5.

As per the minutes, MPC member and RBI executive director Micheal Patra said that the weakness in the real economy is likely to continue, if not weaken further, into the third quarter.

Technical View:

Nifty formed a small bullish candle on daily charts as the closing rate was higher than the opening tick.

One interesting thing was a buy signal triggered by the MACD indicator, or Moving Average Convergence/Divergence indicator, on the daily charts.

The MACD indicator is basically a refinement of the two moving averages system and measures the distance between the two moving average lines.

Experts say the technical-chart patterns indicate that there could be a consolidation in the coming sessions.

As risk-reward ratios from the current levels may not favour a long-side trade, experts advised short-term traders to remain neutral on the buy side and wait for some correction before going long. Shorting can be considered on a close below 12,191 for a target of 12,050.

Three levels: 12191, 12268, 12300-12350

Max Call OI: 12,300, 12,000

Max Put OI: 12,000, 12,200.

Stocks in the news

Suzlon Energy: Rakesh Sharma is appointed as Nominee Director of the company by SBI.

Hexaware Tech: Company approved the reconstitution of the committee of the board.

Gujarat State Petronet: Pankaj Joshi resigned as the Director of the company.

Technical Recommendations:

We spoke to Sanctum Wealth Management and here’s what they have to recommend:

PVR | Buy | LTP: Rs 1,832.60 | Target price: Rs 2,070 | Stop loss: Rs 1,740 | Upside: 13%

Mahanagar Gas | Buy | LTP: Rs 1,062 | Target price: Rs 1,200 | Stop loss: Rs 1,030 | Upside: 13%

Coromandel International | Buy | LTP: Rs 509.90 | Target price: Rs 600 | Stop loss: Rs 490 | Upside: 18%

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