The Nifty is witnessing choppy consolidation over the last one month precisely at the 80 per cent retracement of the entire decline from 2015 life high of 9,119 to February 2016 bottom of 6,825 placed around 8,660 region. We believe the current consolidation has helped the index gradually work off the highly overbought conditions on the weekly stochastic oscillator after the strong rally over the preceding five months. The performance of broader markets during the recent consolidation highlights the overall robust price structure as the broader markets represented by midcap and small cap indices have consistently outperformed the benchmark. The NSE Smallcap index surged to a new life high in August while the mid cap index achieved this feat in July 2016. The broader markets along with key sectoral indices surging to life highs well ahead of the benchmark highlight broad based participation in the current up move and augur well for the index going forward. We believe the higher base building process in the last month provides the platform for continuation of the up move in the coming months. We expect index to trade with a positive bias and resume up move towards the interim target of 8850 going forward.
Maruti Suzuki (Buy)
CMP: Rs 4,949, Target: Rs 5340, Stop loss: Rs 4744
Why Buy: Recent sideways consolidation has resulted in a bullish Pennant pattern on daily chart indicating continuation of upward momentum after a brief pause
Britannia Industries (Buy)
CMP: Rs 3436, Target: Rs 3840, Stop loss: Rs 3248
Why Buy: Stock has registered a resolute breakout from medium term rounding pattern signalling resumption of primary uptrend
Syngene International (Buy)
CMP: Rs 435, Target: Rs 495, Stop loss: Rs 408
Why Buy: Stock is at the cusp of breakout from bullish Cup & Handle pattern and momentum oscillators remain in buy mode
(The author is Dharmesh Shah, head-technical, ICICIDirect Research)
It is confirmed that the research analyst or his relatives or ICICI Securities do not have actual/beneficial ownership of 1 per cent or more securities of the subject company, at the end of July 2016 or have no other financial interest and do not have any material conflict of interest. ICICI Securities or its associates might have received any compensation towards merchant banking/ broking services from the subject companies mentioned as clients in preceding 12 months.