Sensex forms strong reversal formation

Mumbai: On Thursday, the benchmark indices witnessed a volatile trading session, after a roller-coaster, BSE Sensex was up by 677 points. Among sectors, Reality indices outperformed rallied 1.90 per cent whereas despite strong momentum some profit booking were seen in selective PSU Banks stocks.

Technically, after intraday correction, the market took the support near 72,530 and bounced back sharply. On intraday charts, it has formed strong reversal formation and it also succeeds to close above 50 and 20-day SMA (Simple Moving Average) which is largely positive.

Shrikant Chouhan, head (equity research), Kotak Securities, said: “We are of the view that, 50-day SMA or 73,500 would act as a sacrosanct support zone for the bulls. As long as the index is trading above the same, the bullish momentum is likely to continue.”

On the higher side, immediate resistance for the index could be 74,000-74,200. On the flip side, below 50-day SMA or 73,500 the uptrend would be vulnerable. Below the same, traders may prefer to exit out from the trading long positions.

Widespread buying in the closing hour session saw key indices notch up significant gains in another volatile trading session. At a time when FIIs have been ploughing out funds from domestic equities, news of new stocks being added to the MSCI index which is expected to bring in fresh FPI flows has brought some cheers to the markets.

“On the election front, there are talks that the ruling BJP government will attain majority and form the government, which would mean continuity in policy reforms going ahead,” says Prashanth Tapse, Senior VP (research), Mehta Equities Ltd.

STOCK PICKS

Manappuram Finance (Buy)

CMP: ₹185.10 | SL: ₹180 | Target: ₹200

The stock has given a strong breakout above its anchor VWAP resistance mark of ₹183.25 and successfully closed above this level. With volumes being nearly 1.5 times its 30-day average volume and with the RSI showing a good uptick and being around 51, it indicates that the stock should see good momentum in the upcoming sessions. It is expected that the stock will eventually reach the ₹200 mark over time. However, a strict stop-loss at ₹180 is advised to manage risk effectively.

Canara Bank (Buy)

CMP: ₹113.70 | SL: ₹109 | Target: ₹120

The stock has re-tested its anchor VWAP support mark of ₹113.50 on its daily timeframe charts and witnessed profit booking of nearly 4% in Thursday’s session. With the overall trend being positive and the stock also re-testing its gap support zone, we expect good movement in the stock’s price over time. The stock should head higher towards the target of ₹120 and above. However, a strict stop-loss should be kept at ₹109 to manage risk effectively.

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

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