Sensex forms bearish candle

Mumbai: On Wednesday, the benchmark indices witnessed a profit booking at higher levels as NSE Nifty ends 108 points lower, while BSE Sensex was also down by 422 points. Among sectors, Auto index lost the most shed over two per cent whereas despite weak market sentiment buying interest were seen in selective FMCG and Pharma stocks. Technically, after early morning sharp selloff eventually it took the support near 24,150/79,400 and witnessed some recovery. On daily charts, the index has formed a bearish candle, which indicates weak sentiment is likely to continue in the near future.

Shrikant Chouhan, head (equity research), Kotak Securities, said: “We are of the view that, Wednesday’s day low or 24,150/79,400 would act as a key support zone for the day traders.”

If the index succeeds to trade above the same, then it could retest the level of 24,450/80,500. Further upside may also continue which could lift the index till 24,500-24,550/80,700-80,900. On the flip side, below 24,150/79,400 selling pressure is likely to accelerate. Below which the market could slip till 24,050-24,000/79,100-78,800.

“Markets had been hitting new highs over the past few weeks. Hence, investors resorted to profit-taking because of the stretched valuations of Indian equities. While several sectoral stocks have run up sharply ahead of their fundamentals, the upcoming earnings of many of these companies will show if the rise is justified or not. Also, investors would look to churn their portfolios ahead of the Budget and trim their exposure in risky stocks,” says Prashanth Tapse, senior V-P (research), Mehta Equities.

STOCK PICKS

REC LTD| Buy | CMP : 630.50 | SL : 600 | TARGET : 660

REC LTD has given a strong breakout above its recent swing high resistance mark of 619.20 and showing overall good signs of momentum. With the RSI (14) being placed around 72 , it is indicating strong momentum for the stock and we expect the stock to head higher as this rally extends further. Volumes in Wednesday’s trading session were nearly 1 time its Avg (30) days volume which shows good strength as well. We recommend a buy on REC LTD with a strict SL of 600 for targets of 650 and 660.

ICICIPRULI|Buy | CMP : 660.40 | SL : 640.00 | TARGET : 700.00

With the volumes spiking and rising to be nearly 2.5 times its Avg (30) days volume on the stock, ICICI PRU shares have given a robust breakout on its daily time frame technical charts. RSI (14) on daily time frame being around 74 is indicating strong momentum conditions and with the price action being positive and breaking out of important resistance level, it appears that the stock should head higher. We recommend a buy on ICICI PRU with a strict SL of 640 for targets of 690 and 700.

(Source: Riyank Arora, technical analyst at Mehta Equities)

CMP (Current Market Price); SL (Stop Loss)/All prices in Rs