Nifty likely to head towards 10,600; 3 stocks which can give up to 21% return in 6 months

Gradually, Nifty will head towards last five week’s identical high of 10650, as it coincides with 50% retracement level of entire fall from January peak (11172-10142), placed at 10656.

By Dharmesh Shah

Equity benchmarks witnessed a subdued session and settled at 10366 levels. Since January 2018 peak, we have observed that index has seen up move over three consecutive sessions, in line with that, the market took a breather on Tuesday after three sessions rise.

In the last five sessions, Nifty has retraced 61.8% of earlier six days fall, indicating weak pullback, suggesting a round of a couple of day’s consolidation in a range of 10300 – 10450 levels.

We believe that the market will hold the intermediate support of 10300 as it is the confluence of:

a) 50% retracement level of recent pullback (10142 -10479)

b) The lower band of February’s consolidation range

Thus, any breather towards 10300 should be used as an incremental buying opportunity in quality stocks. Going ahead, we expect that the ongoing consolidation in the range of 10300 - 10450 would set the stage for next leg of a pullback.

Gradually, Nifty will head towards last five week’s identical high of 10650, as it coincides with 50% retracement level of entire fall from January peak (11172-10142), placed at 10656.

Therefore, 10450 would be the key level to watch out for as it is a confluence of:

a) The placement of falling channel (drawn adjoining recent lows of 10398 – 10303 and projected from high of 10632) around 10445

b) 61.8% retracement level of the last leg of fall (10632 – 10142) placed at 10444 coming session

Structurally, the recent decline of 490 points was smaller than the last leg of the fall of almost 896 points, indicating a deceleration of selling pressure near key support zone of 10100–10000.

After the first leg of the fall of 896 points, the Nifty retraced over 360 points. Thus, a comparatively bigger magnitude of pullback from here on would be the first signal of structural strength.

The Nifty and Nifty Midcap indices had broken out of their February lows whereas Nifty small cap managed to hold above it, indicating relative strength. At the same time, the Nifty small cap index has taken support from the lower band of a long term rising channel and bounced back.

Hence, we expect broader market to outperform amid the stock specific action. At the same time, we expect the index to hold the earmarked support of 10000 –10100 and form a base in the range of 10000 -10450.

Titan Company Ltd: BUY| CMP Rs865| Target Rs1048| Stop Loss Rs768| Return 21% Time Frame 6 months

The stock witnessed a strong rally in the CY17 rallying from a low of | 297 to its all-time high of | 824. In the process, the stock witnessed a faster retracement of its last major decline as the 22-month decline was completely retraced in just seven months.

At present, stock confirmed the rising channel breakout (containing the entire price activity since March 2011 till date) by retesting it on the monthly chart, signalling a structural turnaround in favour of the bulls on the long-term chart.

The key support base for the stock is placed around Rs770 region as it is the trend line support joining previous lows December 2016 (Rs307) and October 2017 (Rs582), which also coincides with the recent trough of February 2018 thus making it a major support for the stock.

The key observation of price action reveals that the previous rally during December 2016 lows (297-654=357 points) has become bigger in magnitude than the preceding February 2014 – January 2015 rally (203- 444=241 points).

Further, the decline during September-October 2017 (| 654-564=90 points) is lower in magnitude compared to September–November 2016 decline (444-297=147 points).

The price rallies getting bigger and swifter while declines becoming shallower, is a hallmark of the bull phase and corroborates the bullish view on the stock.

Considering the robust price structure and above-mentioned technical observations, we expect the stock to continue its current uptrend and head towards Rs1048 in the medium term where current up move from December 2017 low of Rs773 would achieve price parity with the previous major rally from Rs564 to Rs839 (839-564=275 points).

Godrej Properties: BUY| CMP Rs758| Target Rs850| Stop Loss Rs715| Return 12% Time Frame 1 months.

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