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Research Analysts
Dharmesh Shah
Pabitro Mukherjee
Nitin Kunte, CMT
Vinayak Parmar
Ninad Tamhanekar, CMT
Technical Strategy
Golden Cross: Midcap and Smallcap - Rise of the phoenix…
May 2019
May 23, 2019
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 2Source: Bloomberg, ICICI Direct Research
Golden Cross: Midcap and Smallcap - Rise of the phoenix…
As we wade through election related volatility, the benchmarks are already at new life-time highs in a
positive follow through to a “Golden Cross” signal developed early during March 2019.
A similar rear bullish phenomenon (Golden Cross) has now dawned on Nifty Midcap and small cap indices,
which indicates a bullish shift in trend direction, along with maturity of 14 month corrective phase on Nifty
Midcap index. These twin developments make us confident of reinforcing our positive stance on broader
markets. We expect midcap and small cap indices to embark upon fresh bull trend with significant upsides
and outperform the benchmarks over coming months. Therefore, investors should focus on building a
portfolio of quality cyclical stocks to ride the rally as:
since inception, “Golden Cross” on the Nifty Midcap, small cap have produced minimum return of 29%
and 37%, respectively, in the following year
Bottom up analysis of both indices underscore bullish set up for 70% and 77% constituents
“Golden Crossover”
In technical parlance, when a medium-term moving average (50 day) crosses above longer-term moving
average (200 day) it is termed as a “Golden Cross”. As long-term indicators carry more weight, the Golden
Cross represents a major shift in momentum from bears to bulls and a bull market on the horizon.
50 Day SMA
Golden Cross @
17348 recorded on
22nd
May 2019
200 Day SMA
Nifty Midcap 100Target @ 22000
Nifty Smallcap 100
Golden Cross @
6419 recorded on
20th
May 2019
50 Day SMA
200 Day SMA
Target @ 8700-8800
ScripI-Direct
Code
Buying
Range
Target Stop loss Upside%
Bharat Electronics BHAELE 96-102 115 90 16%
Bank of India BANIND 84-90 101 79 16%
JK Lakshmi Cement JKLAKS 360-380 430 335 16%
Kajaria Ceramics KAJCER 595-615 745 550 23%
PNC Infratech PNCINF 167-174 205 151 21%
* The recommendations were released on iCLICK 2 GAIN
Top Picks Duration: 6 Months
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 3Source: ICICI Direct Research
Nifty Midcap 100: Constituents with 70% weightage pose bullish set up
-------- P
otentia
l R
eturns (
%) --------
-5
-10
-15
-20
0
5
10
15
20
25
30
35
40
1 2 4 5
-------- Technical Ranking --------
3
Returns RankingReturns Ranking
Returns Ranking RankingReturns
Outperformers
ABFRL, Bata India,
Berger Paints, LTTS, RBL
Bank, Pfizer, Ramco
Cement…
Turnaround
Federal Bank, Indian
Hotels, Oberoi Realty,
Prestige Estates..
Bargain Buy
BEL, Bank of India,
Engineers India, GMR Infra,
Cummins, IDFC First, MGL,
M&M Finance, Tata global,
V-Guard, Voltas
Underperformer
Amara Raja,
Balkrishna Industries,
Castrol, Hudco..
Bottom up prognosis indicates bullish
undertone for 70% constituents
Turnaround: Attempting major breakouts after elongated
period of underperformance, thereby pricing in all negatives
Outperformer: Reflects structural uptrend and likely to
outperform. Corrections to offer incremental investment
opportunity
Bargain Buy: Offers favourable risk-reward set-up as
price/time correction approaches maturity
Underperformer: Likely to extend price/time correction and
remain laggards based on technical set-up
* Ranking improves from 1 to 5
Click here to go to top
Category No. of StocksAggregate
Weightage (%)
Turnaround 5 6.81
Outperformer 15 21.29
Bargain Buy 42 42
Underperformer 38 29.90
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 4Source: ICICI Direct Research
Nifty Small Cap 100: Constituents with 77% weightage pose bullish set up
-------- P
otentia
l R
eturns (
%) --------
-5
-10
-15
-20
0
5
10
15
20
25
30
35
40
1 2 4 5
-------- Technical Ranking --------
3
Returns RankingReturns Ranking
Returns Ranking RankingReturns
Outperformers
Merck, NIIT
Technologies, PVR, Bajaj
Electricals, DCM
Shriram…
Turnaround
DCB, Sunteck Realty,
Kalpataru Power
Bargain Buy
KEC, JK Lakshmi Cement,
NCC, PNC Infratech,
Sobha, Timken, VIP
Industries…
Underperformer
Andhra Bank, Rain
Industries, Avanti
Feeds, Ceat, Chennai
Petroleum...
Bottom up prognosis indicates bullish
undertone for 77% constituents
Turnaround: Attempting major breakouts after elongated
period of underperformance, thereby pricing in all negatives
Outperformer: Reflects structural uptrend and likely to
outperform. Corrections to offer incremental investment
opportunity
Bargain Buy: Offers favourable risk-reward set-up as
price/time correction approaches maturity
Underperformer: Likely to extend price/time correction and
remain laggards based on technical set-up
* Ranking improves from 1 to 5
Click here to go to top
Category No. of StocksAggregate
Weightage (%)
Turnaround 3 4.8
Outperformer 11 15.6
Bargain Buy 53 56.7
Underperformer 33 22.9
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Golden crossover in Nifty Midcap 100 & Small cap 100 constituents…
May 23, 2019 ICICI Securities Ltd. | Retail Equity ResearchSource: Spidersofrtware, ICICI Direct Research
4Click here to go to top
Nifty Midcap 100
Nifty Smallcap 100
Nifty Midcap-Golden Cross occurred Earlier
Name Date Returns Name Date Name Date Name Date
RBLBANK 20-Dec-18 20% GRUH 21-May-19 UNIONBANK 9-Apr-19 MANAPPURAM 20-Feb-19
INDHOTEL 19-Dec-18 7% BEL 20-May-19 JSWENERGY 4-Apr-19 IGL 7-Feb-19
SRF 11-Dec-18 40% GSPL 16-May-19 LICHSGFIN 2-Apr-19 IDFCFIRSTB 25-Jan-19
TORNTPOWER 4-Dec-18 4% LTTS 10-May-19 JUBLFOOD 1-Apr-19 BANKINDIA 21-Jan-19
PFC 21-Nov-18 19% CROMPTON 9-May-19 RAMCOCEM 29-Mar-19 VGUARD 16-Jan-19
APOLLOHOSP 11-Oct-18 24% CANBK 23-Apr-19 SYNGENE 28-Mar-19 MGL 14-Jan-19
MUTHOOTFIN 28-Sep-18 57% CHOLAFIN 16-Apr-19 VOLTAS 25-Mar-19 FEDERALBNK 7-Jan-19
ADANIPOWER 21-Sep-18 123% GMRINFRA 15-Apr-19 PNB 12-Mar-19 RECLTD 7-Jan-19
ABFRL 27-Aug-18 13% PRESTIGE 12-Apr-19 OBEROIRLTY 6-Mar-19 PIIND 1-Jan-19
INFOEDGE 31-Jul-18 50%
BERGEPAINT 30-Apr-18 22%
PFIZER 16-Nov-17 23%
BATAINDIA 31-Mar-17 161%
Nifty Midcap constituents where Golden Crossover has occured recently
Nifty Smallcap-Golden Cross occurred Earlier
Name Date Returns Name Date Name Date Name Date
GODFRYPHLP 20-Dec-18 35% KEC 13-May-19 SYNDIBANK 12-Apr-19 KALPATPOWR 6-Mar-19
PVR 21-Nov-18 29% MINDAIND 10-May-19 CANFINHOME 10-Apr-19 CHAMBLFERT 12-Feb-19
MERCK 12-Dec-17 341% ASHOKA 7-May-19 UJJIVAN 5-Apr-19 DCBBANK 11-Feb-19
RAYMOND 6-May-19 SUNTECK 4-Apr-19 NIITTECH 6-Feb-19
BAJAJELEC 30-Apr-19 JUSTDIAL 1-Apr-19 BEML 29-Jan-19
INDIACEM 30-Apr-19 SONATSOFTW 26-Mar-19 ITI 28-Jan-19
EQUITAS 26-Apr-19 NCC 25-Mar-19 KAJARIACER 22-Jan-19
PNCINFRA 26-Apr-19 JKLAKSHMI 11-Mar-19 LALPATHLAB 15-Jan-19
CESC 16-Apr-19 DCMSHRIRAM 8-Mar-19
DEEPAKNTR 15-Apr-19 SOBHA 8-Mar-19
Nifty Smallcap constituents where Golden Crossover has occurred recently
Among Nifty Midcap 100
constituents, stocks with
collective weightage of
52% have already
recorded golden crossover
signifying index gaining
momentum
Among Nifty Smallcap 100
constituents, stocks with
collective weightage of
41% have already recorded
golden crossover signifying
index gaining momentum
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 6Source: Spidersoftware, ICICI Direct Research
Nifty Midcap 100: Strategy worked 71% of time with minimum gain of 29%
Nifty Midcap’s one year performance post Golden Cross since August
2006• Since August 2006 the index has
signalled seven Golden cross with 71%
strike rate
• The average one year gain has been 35%,
while minimum gain has been 29%
• On two occasions signal failed with a
maximum draw down of 7%
Target @ 22000
Click here to go to top
Golden Cross @
17348 recorded on
22nd
May 2019
Crossover Dates Index Value1 year Returns post
event (%)
10/10/2006 4795 43.0
6/3/2009 5590 38.2
3/19/2012 7559 -4.8
7/18/2012 7356 0.9
12/5/2013 7725 64.9
12/7/2015 13183 -7.1
5/30/2016 13335 29.2
* Calculation is based on closing basis
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 7Source: Bloomberg, ICICI Direct Research
Nifty Midcap 100: 17348
Golden Cross @ 17348
recorded on 22nd
May
2019
8859
Target @ 22000
Target of 22000 is based on:-
161.8% external retracement of last major decline (from September 2018 high of
21840 to October 2018 low of 15803), placed at 22730
Maturity of price wise and time wise correction have opened the doors for a strong
rally (minimum 40%) in the following year…
Empirically, index has never breached the 14 month cycle lows
Since August 2006, the index has rallied a minimum 29% over the next year
subsequent to “Golden Crossover”, in the current scenario it projects 22400
Nifty Midcap 100 Monthly Chart
Click here to go to top
48 Months SMA
9782
2930
9853
6030
169% 41%
48%
11190
14238
21840
15803
14 Months
14 Months
14 Months
14 Months
12 Months
12 Months
12 Months
Nifty Midcap 100 - Daily Chart
6331
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 8Source: Spidersoftware, ICICI Direct Research
Nifty Small Cap 100: Strategy enjoys 100% strike rate with minimum 37% gain..
Nifty Small Cap’s one year performance post Golden Cross since April
2013
• Since April 2013 the index has signalled
two Golden cross with 100% strike rate
• The average one year gain has been
50%, while minimum gain has been 37%
Target @ 8700
Click here to go to top
Golden Cross @
6419 recorded on
20th
May 2019
Crossover Dates Index Value1 year Returns post
event (%)
12/6/2013 3249.35 64.5
6/10/2016 5389.15 36.8
* Calculation is based on closing basis
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 9Source: Bloomberg, ICICI Direct Research
Nifty Small Cap 100: 6391
Golden Cross recorded on
22nd
May 2019 @ 11427
6112
Target @ 8700
Target of 8700 is based on:-
According to classical technical evidence, 78.6% retracement of CY18 decline
(from 9656 to 5670), placed at 8803
Since August 2006, the index has rallied a minimum 37% over the next year
subsequent to “Golden Crossover”, in the current scenario it projects 8700-8800
Nifty Small Cap 100 Monthly Chart
Click here to go to top
2509
5972
Golden Cross @
6419 recorded on
20th
May 2019
9656
4206
Nifty Smallcap 100 - Daily Chart
5670
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Bharat Electronics (BHAELE): Breakout from base formation..
May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 10Source: Bloomberg, ICICI Direct Research
Top Picks
Bank of India (BANIND): Favourable risk reward set up
o Breakout from a six month basing pattern formed at key support
o Stock price seen emerging above 52-week EMA (| 99) for first time since February 2018
validating change of guard from bear to bull
o We place a target of | 115 where current up move from May low of 85 will equate
February–March rally (| 72-102)
Weekly bar chart Weekly bar chart
Rec. Price 96-102 Target 115.00 Stop loss 90.00 Rec. Price 84-90 Target 101.00 Stop loss 79.00
o First higher high-low on weekly after six weeks decline
o Stock price placed near key support of | 80 which has been held on four occasions over
past one year, thus offering favourable risk-reward set-up
o Expect share price to rally towards | 102 which is 80% retracement of past six week
decline (| 108-79)
Breakout from six month base formation
near key support augurs well
Weekly MACD diverging from its 9 period average
Equality @ 115
80% retracement
at 102
193
72
85
Multi-month support @ 80
* Recommendation released on i-click to gain on May 22, 2019 at 14:08 hrs Duration: 6 Months
217
* Recommendation released on i-click to gain on May 22, 2019 at 14:10 hrs Duration: 6 Months
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JK Lakshmi Cement (JKLAKS): Falling channel breakout
May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 11Source: Bloomberg, ICICI Direct Research
Top Picks
PNC Infratech (PNCINF): Triple bottom breakout
o Strongest rally since May 2017 peak leads to falling channel breakout and sustaining
above the same
o Faster retracement of past four week decline indicate resumption of up trend
o We expect the stock to resolve higher towards | 430, which is 80% retracement of
March – November 2018 decline (| 487-260)
Weekly bar chart Weekly bar chart
Rec. Price 360-380 Target 430.00 Stop loss 335.00 Rec. Price 167-174 Target 205.00 Stop loss 151.00
o The stock has given a resolute breakout from triple bottom bullish reversal pattern
indicating fresh upsides
o The base of triple bottom is placed at the 200 weeks EMA and MACD giving buy signal
o We expect the stock to continue its current up move and test | 205 levels as it the 80%
retirement of the entire decline (| 228 to | 123)
Bullish breakout from falling channel augurs well
Triple bottom base at the 200 weeks EMA
MACD in buy mode
80% retracement
at 430
80%
retracement at
205
260
333
487
99
228
168
159
125
Triple bottom breakout augurs well
200 weeks EMA
* Recommendation released on i-click to gain on May 23, 2019 at 09:16 hrs Duration: 6 Months * Recommendation released on i-click to gain on May 23, 2019 at 10:19 hrs Duration: 6 Months
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Kajaria Ceramics (KAJCER): Rising channel intact
May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 12Source: Bloomberg, ICICI Direct Research
Top Picks
o The entire up move since October 2018 is well channelled signalling sustained buying at
elevated levels
o The stock has recently rebounded taking support at the 52 weeks EMA
o The stock is likely to head towards | 750 as it is the 161.8% extension of the previous up
move (| 496 to 635) from the recent trough of | 543 signals upside towards | 750
Weekly bar chart
Rec. Price 595-615 Target 745.00 Stop loss 550.00
The up move is well channeled
signalling positive bias
Weekly MACD taking support at its signal line
161.8% extension
at 750
554
765
310
54352 weeks EMA
* Recommendation released on i-click to gain on May 23, 2019 at 09:20 hrs Duration: 6 Months
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Buy on decline in election year, get rewarded handsomely…
In two out of three occasions, the markets behaved indecisively five
months prior to general elections. In contrast, throughout the past
three general elections, both Nifty and Nifty 500 indices exhibited a
robust performance seven months post the general election phase
with average returns of 27% and 33%, respectively
During all three general election years, pharma & BFSI have remained
positive whereas auto, capital goods, construction and infra sectors
have relatively outperformed during a general election year
During seven months post general
elections, all sectors performed and
clocked double digit gains
May 23, 2019 ICICI Securities Ltd. | Retail Equity ResearchSource: Bloomberg, ICICI Direct Research
Among defensives, FMCG and pharma have relatively
outperformed five months prior to general elections.
In contrast, consumer discretionary and IT have
outperformed seven months post general elections
4
5 Months Pre -
Election
7 Months Post -
Election
5 Months Pre -
Election
7 Months Post -
Election
5 Months Pre -
Election
7 Months Post -
Election
Index Nifty -8 22 26 43 13 15
Index Nifty 500 -6 26 23 53 14 21
Cyclical Auto & Components -12 45 16 120 28 80
Cyclical BFSI 0 46 5 70 20 43
Cyclical Capital Goods -12 67 6 89 23 44
Cyclical Cement -2 67 10 69 33 53
Cyclical Construction and Infra -8 63 37 112 38 28
Cyclical Energy -11 36 52 58 22 14
Cyclical Metals -25 77 34 123 17 -1
Cyclical Power -14 52 37 45 13 16
Defensive Consumer discretionary -20 83 -5 106 20 36
Defensive FMCG -5 51 38 82 7 27
Defensive IT -27 55 9 119 8 34
Defensive Pharmaceuticals 1 39 28 89 11 31
SectorsSector's Nature
Sectoral Election Year Trend (Returns in %) Universe: Nifty 500
20142004 2009
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 14Source: Bloomberg. ICICI Direct Research
Price history of past three years
BEL Bank of India Kajaria Ceramic
JK Lakshmi PNC Infratech
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 15Source: ICICI Direct Research
Notes......
• It is recommended to enter in a staggered manner within the prescribed range provided in the report
• Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the report
on closing basis
• The recommendations are valid for six months and in case we intend to carry forward the position, it
will be communicated through separate mail
Trading portfolio allocation
• It is recommended to spread out the trading corpus in a proportionate manner between the various
technical research products
• Please avoid allocating the entire trading corpus to a single stock or a single product segment
• Within each product segment it is advisable to allocate equal amount to each recommendation
• For example: The ‘Daily Calls’ product carries 3 to 4 intraday recommendations. It is advisable to
allocate equal amount to each recommendation
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 16Source: ICICI Direct Research
Recommended product wise trading portfolio allocation
Duration
Momentum Picks-
Intraday
15% 30-50% 2-3 Stocks 1-2% Intraday
Momentum Picks-
Positional
35% 8-10% 6-8 Per Month 5-8% 1 Month
Gladiator Stocks 45% 15-20% 20-30% 6 Months
Cash 5%
-
100%
Number of Calls Return Objective
Product Product wise
allocation
Allocations
Max allocation
In 1 Stock
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Pankaj Pandey Head – Research [email protected]
ICICI Direct Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 17
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We /I, Dharmesh Shah, Nitin Kunte, Ninad Tamhanekar, Pabitro Mukherjee, Vinayak Parmar Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the
subject issuer(s) or securities. We also certify that 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. Analysts are not registered as research analysts by FINRA and are not associated
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May 23, 2019 ICICI Securities Ltd. | Retail Equity Research 18
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