Two stock recommendations for next week
Sensex could slow down from here on or even correct a bit. Thus one needs to remain extremely cautious.
The month of September 2021 proved to be stupendous for the domestic markets for two major reasons. First, the benchmark index BSE Sensex reached the new milestone of 60,000 and second, the Nifty Bank index finally managed to make a new life time high of 38,377. On the other hand, the Nifty spot index had a close encounter with 18,000 milestone but failed to reach there and eventually close near 17,600 mark. On the whole, Nifty surged by over 2% during the month from its previous close. The derivative data indicates that the rollover for October series stood at around 75% which was lesser than its previous rollover of 83%. In addition, there was a dip in open interest too which indicates that the longs which formed in September 2021 are now out of the system. The other derivative data shows no hints of any kind of major breakthrough since the PCR has been oscillating between 1.5 and 0.9 while the FIIs too have a mixed position in index futures.
In the cash segment, FIIs remained buyers to the tune of over Rs 8000 crore. So even on that front, there is no sign of liquidity squeeze. Now technically the index is facing a hurdle at a psychological mark of 18,000. This might continue to act as a very strong hurdle even in the month of October 2021. Only a breach of the same on the upside would reaffirm the extended rally towards 18,200-18,400. At this juncture, the index is struggling near its previous swing low of 17,326. A daily close below this level might confirm a temporary pause in the uptrend and we could witness some selling pressure in the market. This could drag the index towards the 17,000 mark and that could be decisive support on the technical front. However, one interesting chart we want to share in this edition of the Bazaar Bulletin is Sensex Vs Gold (INR). We gathered the data since 2005 and we witnessed that gold and Sensex have been moving in line with each other.
They tend to catch up with each other whenever there has been a huge divergence between them. Even at this juncture, there is a divergence of around 25% in them. This indicates that either gold will catch up Sensex at 60,000 or both might try to meet in between. In such a scenario, Sensex could slow down from here on or even correct a bit. Thus one needs to remain extremely cautious and stock-specific from here on. With regards to the Nifty Bank index, it slightly outperformed the benchmark indices and surged above 38,000. However yet again it failed to build the momentum and close the month near the 37,500 mark. Now the support for the index is shifted to 36,000 and a breach of the same might reinforce the bears to dominate the banking index. On the upside, only a sustainable move above 38,000 would propel the index towards the 40,000 mark.
Stock recommendations:
Amara Raja Batteries | Buy | Stop loss: Rs 740 | Target price: Rs 820
The stock confirmed an inverse head and shoulder breakout and retested the neckline. It is again having strong momentum which indicates the possibility of clearing 800 hurdles in the coming week.
Glenmark Pharma | Buy | Stop loss: Rs 498 | Target price: Rs 540
The stock is turning from the placement of 200 EMA and 200 SMA on the weekly scale. The risk-reward is highly lucrative to go long.
(The writer is AVP: Technical Research, Anand Rathi Shares and Stock Brokers; views expressed are personal)