mistakes done by investors - hdfc securities securities...sectoral indices to outperform in 2021...

Nifty: RSI Trend Breakout on Monthly Chart

Bullish Trend Likely to Continue

Nifty Monthly ChartsCurrent Level: 14018

Trend Breakout on Monthly RSI

Technical Rationale

• Nifty registered a rally of more than 85% fromthe low witnessed in March 2020. Nifty hasclosed at new all time high and has managed tosurpass the level of 14000.

• Nifty has rallied almost 13% above the previousall time high of 12430. However, in the recentrally RSI on the Monthly chart has registered ahigher peak and has also broken out from longterm trend line.

• Though Nifty has reached the long term upwardsloping trend line resistance, development onthe RSI oscillator indicates the probability ofcontinuation of an uptrend.

• World Indices like MSCI Emerging Market, Asian-Ex Japan and World Index have broken out fromthe long term trend line on their monthly charts

• Breadth Indicators like Advance-Decline Trend,number of 52 week highs and the number stocksabove their 200 DMA, indicates healthy markets.

• Stable Rupee and Weak Dollar Index also augurswell for the Indian Equity Markets for Year 2021

Breakout

Nifty Heading Towards 14890 & 15470

Long Term Supports seen at 13590 & 12430

Nifty Monthly Charts

Trend Breakout on Monthly RSI


Current Level : 14018

Fibonacci Targets: 14309, 14890 and 15470

Technical Rationale

• In the month of November 2020, Nifty retraced100% of the entire down swing seen from Jan2020 top(12430) to March 2020 bottom(7511).

• More than 100% retracement gives birth tofresh bull markets and now Nifty is in tocontinuation of an uptrend.

• Nifty is now expected to retrace 138.2%, 150%and 161.8% retracement, which are placed at14309, 14890 and 15470 levels respectively.

• The Target of 15470 is 10% away from thecurrent levels, which could be achieved in theyear 2021. Though 10% rally in the Index is not abig number but stock specific returns could bemuch better.

• We cannot rule out the possibility of the runningcorrections at regular intervals but those dipsshould be considered as buying opportunity.

• Short- term support for the Nifty is seen at13590. Long Term support for the Nifty Index isplaced at 12430, which happens to be theprevious all time high ,registered in Jan 2020.

Number of 52 Week Highs from NSE500Still Lower Than Year 2017, 2014 and 2007Best is Yet to Come


Monthly Trend2007

2014

2017

2020

SmallCap - Midcap Momentum Rising

Outperformance Likely to Continue

SmallCap and Nifty Ratio Chart Since March 2020

Nifty, Midcap and SmallCap Performance Chart Since March 2020

Ratio Indicates Momentum in Smallcap is Rising

Advance Decline Ratio > 1 For 10 Months in 2020

Highest After 2014; Indicates Strong Breadth

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Dec-2

0

Sep-2

0

Jun-2

0

Mar-

20

Dec-1

9

Sep-1

9

Jun-1

9

Mar-

19

Dec-1

8

Sep-1

8

Jun-1

8

Mar-

18

Dec-1

7

Sep-1

7

Jun-1

7

Mar-

17

Dec-1

6

Sep-1

6

Jun-1

6

Mar-

16

Advance Decline ratio

FII Net Inflow – Highest Ever In a Calendar year

FII Buying Driving the Markets

-80000

-60000

-40000

-20000

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Net foreign Equity Investment Rs(Cr) Net Mutual Fund Investment Rs (Cr)

Stock Futures Open Interest 28% Lower

Derivative Markets Light Despite Nifty At Highs

0

100

200

300

400

500

600

Oct

-15

Dec

-15

Feb

-16

Ap

r-1

6

Jun

-16

Au

g-1

6

Oct

-16

Dec

-16

Feb

-17

Ap

r-1

7

Jun

-17

Au

g-1

7

Oct

-17

Dec

-17

Feb

-18

Ap

r-1

8

Jun

-18

Au

g-1

8

Oct

-18

Dec

-18

Feb

-19

Ap

r-1

9

Jun

-19

Au

g-1

9

Oct

-19

Dec

-19

Feb

-20

Ap

r-2

0

Jun

-20

Au

g-2

0

Oct

-20

Dec

-20

Stock Futures' OI Still 28% Lower than All Time High (No Of Shares Cr)

Long Term Bullish Breakout on World Market

MSCI World Market Index Monthly Chart

MSCI Asia Ex-Japan IndexMonthly Chart

MSCI Emerging MarketMonthly Chart

Trend Breakout Trend Breakout

Trend Breakout

Commodity Index : Long Term Breakout

Commodity Stocks Likely to Perform Well

Bloomberg Commodity Index Monthly Chart

Breakout from Long term Falling Wedge

Bullish Trend

Breakout

USDINR: Reversed From Channel Resistance

Below 73 Rupee Could Appreciate Further

USDINR Monthly Chart

Rupee Can Strengthen Further below 73

ICE Dollar Index: At 2.5 Year Low

Lower Dollar Index Augurs well for Equity Market

ICE Dollar Index Monthly Chart

At 2.5 Year Low

ICE Dollar Index Monthly Line Chart

Bearish Trend Breakout

Sectoral Indices to Outperform in 2021

Nifty Metal Index: Breakout From Strong Base

Technical Rationale

• Nifty Metal, on the weekly chart (left chart) haswitnessed bearish trend line breakout with higher highformation which indicates new uptrend could emerge.

• Relative strength (RS) (right chart) is indicating thatmetal could lead the rally. If we observe the RS chart ,we can see strong base was formed (base 1) after thesteep fall and then the bullish break out.

• Identical behaviour is observed near base 2 withbullish break out on price chart as well as on RS chartwhich gives us enough confidence to bet on Metalsector for the year 2021.

• Moreover, RSI 14 on weekly time frame has alsogiven bullish breakout which suggests upwardmomentum could sustain in the near term.

• The worst seems to be over for metal stocks and itcould continue its upward moment in the year 2021.Stocks with positive bias are SAIL, NALCO and NMDC

Strong Base 1

Strong Base 2

Trend line break

Current Level Targets Supports Trend Reversal Level

3258.85 3800, 4000 3140-2990 2800

Nifty Metal Weekly Line Chart

Relative Strength Comparison

Metal/Nifty Weekly Chart


Pharma Index: Breakout from ConsolidationCurrent Level Targets Supports Trend Reversal Level

13002 14021-14200 12800-11900 11800

Technical Rationale

• In the Month of July 2020, Nifty Pharma Index broke outfrom the downward sloping trend line on the monthlycharts.

• Index fell into consolidation zone of 11000-12500 in theperiod of Aug to Nov 2020.

• In the Month of December 2020, Index has broken outfrom the consolidation of 4 months

• Index is marching towards its previous all time high whichwas registered on March 2015.

• Momentum indicators like MACD and DMI have turnedbullish on the monthly chart.

• Pharma has been the best performing sector since March2020 bottom and the same momentum is likely tocontinue on the upside.

• Stocks with positive bias are Lupin, Aurobindo Pharma,Sun Pharma and Cipla.

Long Term Breakouts

Nifty Pharma Monthly Chart


Nifty PSE Index: Trend line BreakoutCurrent Level Targets Supports Trend Reversal Level

2815 3200 - 3600 2200 3200

Technical Rationale

• Nifty PSE Index has making higher top higher bottomformation.

• Index has also crossed above the downward sloping trendline in linear charts which suggest breakout for the Index.

• Index has taken a support from 100% extension level ofthe previous down move and moved higher suggestinggood support level at 2200 level.

• Momentum oscillators like MACD has given a breakoutfrom downward sloping trend line, which suggests thispositive move could continue towards its intermediate highof 3600 level.

• Index has formed higher top and higher bottom on theweekly charts.

• Money flow index has also given breakout above 80 levelsuggesting this positive trend could continue. Stock withpositive bias are BEL, BHEL, GAIL and NALCO

Nifty PSE Weekly Chart


Nifty Energy Index: Multi Month BreakoutCurrent Level Target Support Trend Reversal Level

16976 21970 15989 14400

Technical Rationale

• After correcting sharply in early 2020 and touching a lowof 9750 in March 2020, the Nifty Energy index recoveredequally sharply in months following.

•The index then consolidated in a range between the14070-16302 levels between July-October 2020.

• The 200 day SMA provided support to the index duringthis consolidation period before it broke out in November2020.

•The index moved up further in December 2020 to new lifehighs, thereby confirming breakout of this inverse head andshoulder pattern.

• Monthly RSI has also broken out from the downwardsloping trend line, indicating bullish momentum.

• Index contains sector like Power and Oil and Gas. Stockswith positive bias are Tata Power, Powergrid, GAIL andHPCL.

Nifty Energy Monthly Chart

Long Term Breakout

Stock Buying Range Average Level Targets SL* Time Horizon

Adani Ports 503 – 510 460 590,680 425 6-12 Months

Lupin 1000 – 1020 950 1150, 1440 880 6-12 Months

Kalyani Steel 283 – 289 255 332, 375 241 6-12 Months

Bharat Electronics 126 – 128 115 148, 162 106 6-12 Months

Dhanuka Agritech 775 – 785 675 925, 1050 645 6-12 Months

Max Financial Services 691 – 705 650 789, 833 600 6-12 Months

Note: *Excluding Freak Trades lasting less than a minute.

Technical Stock Picks for Year 2021

Technical Pick 2021: Adani Ports

CMP Buying Range Average Level Targets SL* Time Horizon

503.85 503-510 460 590,680 425 6-12 Months

Technical Rationale

• Stock Price has broken out from the downward slopingtrendline on the Quarterly chart with sharp rise in thevolumes.

• RSI Oscillator has also given breakout from the downwardsloping trendline Indicating strength in the current uptrend.

• Stock has been forming higher tops and higher bottoms.

•It has given breakout on the daily chart On Jan 01 withsurge in volumes.

• Plus DI is trading above Minus DI while ADX line is tradingabove 25 Indicating momentum in the current uptrend

• Stock Price has been taking support at 20 day SMA

•We therefore believe that Stock price is likely to continueits northward journey for the months to come.

Adani Port Quarterly ChartBreakout

Technical Pick 2021: Lupin


1000.90 1000-1020 950 1150,1440 880 6-12 Months

Technical Rationale

• After correcting from a high of 2129 touched in 2015,Lupin found support at the 504 levels in March 2020.

•The stock has since then rebounded and been consistentlymaking higher tops and higher bottoms on the charts.

•In the process, the stock also took out its previousintermediate highs of 884, indicating that the stock is nowin a new intermediate uptrend.

• Technical indicators are giving positive signals as the stocktrades above the 20 week and 50 week SMA.

• Stock has been forming higher tops and higher bottoms.

• Indicator and Oscillator setup is bullish on charts.

•Long term momentum readings like the 14-month RSI tooare rising and not overbought.

•We therefore believe the stock is headed higher in 2021.

Lupin Weekly Chart

Technical Pick 2021: Kalyani Steels Ltd


283.95 283-289 255 332, 375 241 6-12 Months

Technical Rationale

• In the Month of December 2020, Stock broke out fromthe last six month’s price consolidation.

• Stock price has also broken out from bullish inverted headand shoulder pattern on the monthly chart.

• Metal Sector has been outperforming for last manymonths and same is expected to continue as Ratio chart ofMetal vs Nifty has been improving.

• Stock has surpassed the crucial multiple top resistanceplaced at 260.

• Volumes during the price breakout was significantlyhigher in the month of Dec 2020.

• DMI Indicator has turned bullish on the monthly chart, as+DI is moving up along with the ADX.

• MACD on the monthly chart has reached above its signaland equilibrium line.

KSL Monthly Chart

Breakout

Technical Pick 2021: Bharat Electronics


126.40 126-128 115 148, 162 106 6-12 months

Technical Rationale

• Price Action:- BEL has given a break out from horizontalconsolidation on weekly chart. It took around 28 months toform the said pattern. Inverted Head and shoulder is alsoobserved on the weekly chart. Thus it indicates long termreversal and stock could soon test the recent high of 165.

•Trend:-The stock took out its previous intermediate highsof 124 and thus made higher high formation on weeklychart, indicating that the stock is now in a newintermediate uptrend.

•Volume :- On the weekly chart it is seen that stock price isrising with a rise in volumes and on correction there issignificant drop in the volume , this is an important volumeconfirmation behaviour for valid uptrend.

•Indicators:- Technical indicators are giving positive signalsas the RSI 14 on the weekly chart is above 60 level andbullish range shift behaviour is observed. Also, +DMIcrossover is observed on the weekly chart which givesconviction for stronger momentum in the near term.

BEL Weekly Chart

Breakout from rectangle pattern

Technical Pick 2021: Dhanuka Agritech


781.65 775 – 785 675 925,1050 645 6-12 Months

Technical Rationale

• After showing a minor decline/sideways consolidation,the stock price has shifted into an upside move.

•On weekly chart the stock has breached the downwardsloping trend line with high volumes suggesting breakoutfor the stock.

•The stock is also taking support from upward sloping trendline by making higher bottoms. As per Fibonacci series, thestock has corrected for 21 sessions and now it has startedits upward move.

•The stock has corrected up to 100% extension level of itsprevious move and bounced back from that levelsuggesting good support around this level.

•Its momentum oscillator like RSI is trading above 60 levelsuggesting that this up move could accelerate and stockmay move towards its intermediate high of Rs 933 level ina short time span.

Dhanuka Weekly Chart

Breakout

Technical Pick 2021: MFSL


691 691 to 705 650 789, 833 600 6-12 Months

Technical Rationale

• Stock has witnessed a new life high last month and looksset for further new highs.

• Trend is up and the positive momentum is likely tocontinue in the coming months.

• Stock has moved up strongly from the March lows withgood volume build up.

• Stock has registered new all time high recently and is nowtrading in uncharted territory; which is a positive sign

• Higher highs and higher lows have been witnessed in allthe degrees, which is a bullish continuation structure.

• Oscillators are placed with positive sign.

• Volume breakout has been witnessed which adds strengthto bulls

•Maintain bullish stance in the stock for the medium term.

MFSL Monthly Chart

Breakout

Bullish DMI

Bullish MACD

Open Technical & E-Margin Calls

B/S Date Company Name Issued At CMP Averaging Band Stop Loss Target 1 Target 2 Time Horizon Type

B 9-Nov-20 AU Small Finance * 817.3 800-820 760.0 880.0 980.0 6 Months Technical Pick

B 7-Dec-20 Exide Inds 189.7 185-190 170.0 210.0 240.0 6 Months Technical Pick

B 15-Dec-20 JB Chemicals 1072.9 1072.9-1080 960.0 1205.0 1300.0 3 Months Technical Pick

B 16-Dec-20 Zee Entertainment 230.4 220-232 200.0 264.0 296.0 6 Months Technical Pick

B 23-Dec-20 Avenue Supermart 2637.0 2637-2525 2459.0 2820.0 2950.0 3 Months Technical Pick

B 28-Dec-20 Maithan Alloys 555.0 555-560 500.0 625.0 700.0 3 Months Technical Pick

B 30-Dec-20 ICICI GI 1530.0 1435-1530 1404.0 1630.0 1780.0 3 Months Technical Pick

B 14-Nov-20 MAS Financial Service* 930.0 890-930 820.0 1040.0 1150.0 6 Months E-Margin

B 17-Nov-20 L&T* 1083.0 1040 940.0 1229.0 1372.0 6 Months E-Margin

B 23-Nov-20 Bata India* 1464.0 1445 1330.0 1630.0 1850.0 6 Months E-Margin

B 1-Dec-20 National Aluminium* 39.3 38 35.0 43.6 50.0 6 Months E-Margin

B 4-Dec-20 IOC 90.9 88 82.0 99.0 115.0 6 Months E-Margin

B 24-Dec-20 Bayer Corp 5490.0 5100 4965.0 6150.0 6400.0 3 Months E-Margin

B 28-Dec-20 Tata Elxsi 1759.7 1660 1622.0 1901.0 1972.0 3 Months E-Margin

Open Technical-E/Margin Calls

*= 1st Target Achieved

Disclosures and Disclaimers

Stock Analyst Educational Qualification Holding

Adani Ports Nandish Shah MS FINANCE No

Lupin Subash Ganghadharan MBA No

Kalyani Steel Vinay Rajani MBA No

Bharat Electronics Nayak Ajit Srinivas MBA No

Dhanuka Agri Siddharth Deshpande MBA No

Max Financial Gajendra Prabu MBA No

Disclosures

Disclosures and Disclaimers

Disclosure:

We , Vinay Rajani (MBA), Nandish Shah (MS FINANCE) ,Nayak Ajit Srinivas (MBA), Subash Gangadharan(MBA), Gajendra Prabu(MBA) and Siddharth Deshpande(MBA) authors and the nname subscribed of this report, hereby certifythat all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certifythat no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financialinterest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding thedate of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.

Any holding in stock – No

HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475.

Disclaimer:

This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein havebeen compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied,is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or theirsecurities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments.This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident orlocated in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration orlicensing requirement within such jurisdiction. If this report is inadvertently sent or has reached any person in such country, especially, United States of America, the same should be ignored and brought to the attention of thesender. This document may not be reproduced, distributed or published in whole or in part, directly or indirectly, for any purposes or in any manner.

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Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.This report has been prepared based on Technical and/or Derivative Analysis both of which use unique tools to recommend buys/sells as well as to estimate targets. Thetargets arrived at using these methods of analysis may therefore differ from the targets arrived at by using fundamental analysis on the same company whether by HDFCSecurities Ltd. or otherwise.

This report is intended for non-Institutional Clients only. The views and opinions expressed in this report may at times be contrary to or not in consonance with those ofInstitutional Research team of HDFC Securities Ltd. and/or may have different time horizons. Mutual Fund Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

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