Time to buy rate-sensitive stocks in banking and autos

Special to Firstpost

S&P CNX Nifty (5,847.70): The Nifty did nothing much during the just concluded week and was stuck in a trading range. The positive and negative trigger levels of 5,838 and 5,966, mentioned last week, are still intact. A move past either of these levels would set the tone for the next major move in the index.

A fall below 5,838 would indicate that the index could slide to the major support at the 5,700-5,740 range. Even if the index were to fall to this support range, it would not hamper the medium-term bullish view.

[caption id=“attachment_566360” align=“alignleft” width=“380”]  Price weakness would be an opportunity to buy stocks from the rate-sensitive sectors such as banking, automobiles and realty. AFP[/caption]

On the contrary, a breakout past 5,966 would indicate the next leg of the rally to 6,200-6,300 is underway. As long as 5,966 is not breached, it would be safe to work on the premise that a test of the support at 5,740 is on the cards.

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Price weakness would be an opportunity to buy stocks from the rate-sensitive sectors such as banking, automobiles and realty.

CNX Bank Index (12,315.05): The Reserve Bank of India kept interest rates on hold in the just concluded policy meet. While this had a brief negative impact last Tuesday (18 December), the index recovered swiftly and is still trading above the minor swing low at 12,197.

A fall below 12,197 would be a sign that the index is headed towards a deeper correction in the 11,700-11,750 range. The overall outlook for the index, however, remains bullish. A fall below the major swing low at 11,120 is required to negate the positive outlook.

As observed last week, the public sector banks appear better placed technically to deliver superior returns in relation to private sector ones. Investors may use weakness to buy stocks such as Allahabad Bank, Union Bank of India, Rural Electrification Corporation and State Bank.

TCS (Rs 1,258.70): This stock has been in a downward correction over the past few weeks. The price action last week indicates that the stock has completed its correction and could seek higher levels in the near term.

[caption id=“attachment_566359” align=“alignleft” width=“600”]  This stock has been in a downward correction over the past few weeks.[/caption]

Investors may buy the stock with a stop-loss at Rs 1,160, for a target of Rs 1,405. The uptrend would gather momentum on a breakout past Rs 1,405 and the stock could test the major resistance-cum-target of Rs 1,510.

Titan Industries (Rs 279.80): After a sharp rally since 6 September, the price action in the past few weeks indicates that the stock is in a downward correction now. The short-term outlook is bearish and a test of the immediate support at Rs 255 appears likely. Those holding the stock may pare exposures on any minor pull-back rally.

Traders may use counter-trend rally to short the stock, with a stop at Rs 296, for a target of Rs 255, basis the spot price. A fall below Rs 254 would be a major sign of weakness and could open up downside potential to Rs 235-240 range.

(The views and recommendations featured in this column are based on a technical analysis of historical price action. There is a risk of loss in trading. The author may have positions and trading interest in the instruments featured in the column.)