Nifty entering consolidation phase; Bank Nifty should outperform in near-term

"Nifty is heading towards 10,530 zones which might work as immediate demand zones. Range Expansion indicators is trading 96 levels thus suggesting that Nifty may enter into consolidation phase," says Rajesh Agarwal of AUM Capital.

Rajesh Agarwal

Benchmark indices declined for a fourth straight session on Friday, amid developments in the US-China trade negotiations and firm crude prices. The Sensex ended at 34,848, down 301 points. The broader Nifty index settled at 10,605, down 78 points. Among sectoral indices, the Nifty Bank index fell as much as 0.6 percent, extending its drop into the third session.

ICICI Bank and HDFC Bank declined 2.9 percent and 0.8 percent, respectively. The Nifty PSU Bank index also shed 1.6 percent, its fourth consecutive session of fall, on continued concerns about disappointing quarterly results due to a jump in bad loan provisions.

In the global markets, Asian stocks were steady on Friday, while the dollar is perched near its five month peak after the benchmark US Treasury yield hit its highest in seven years.

Technical outlook

Nifty

The Nifty opened flat to negative and continued its down move, closing lower. It has closed below its short-term 20-day exponential moving average (EMA). It is heading towards 10,530 zones which might work as immediate demand zones. On the weekly chart, the relative strength index (RSI) (14) has given a negative crossover around 65 zones which is a bearish sign. Range expansion indicator is trading at 96 levels, thus suggesting that Nifty may enter into a consolidation phase.

Bank Nifty

The Nifty Bank has formed a kind of bullish hammer pattern around its short-term 20 EMA, which stands around the 25,800 zone: its immediate support zone. Decisive trade below this may drag the index lower till 25,450. On the weekly chart, the moving average convergence divergence (MACD) is on the verge of a negative crossover and RSI (14) is in bearish mode. According to Relative Comparative chart, the index should outperform benchmarks in the near-term.

Below are top five stocks that can return up to 5% in the near-term:

Karnataka Bank | Rating: Buy | Target: Rs 125, stop loss: Rs 117, Return: 4%

Jubilant Foodworks | Rating: Buy | Target: Rs 2540, stop loss: Rs 2460, Return: 1%

Tech Mahindra | Rating: Buy | Target: Rs 704, stop loss: Rs 680, Return: 1%

Shriram Transport Finance | Rating: Sell | Target: Rs 1375, stop loss: Rs 1435, Return 2%

PTC India | Rating: Sell | Target: Rs 77, stop loss: Rs 84, Return: 5%

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