Saturday, November 13, 2010

Nifty Heavies Revisited !

The Nifty Heavy Weights with the Best Momentum !!!

After an amazing rally to the stratospheric levels in the Diwali week, it seems that an out of the blue correction has set in, in the stock markets. It seems that equity markets all over the world are going in to the correction mode together. In case you were waiting for a correction to enter in to the stock market, the question is whether you have a stock shopping list ready ! Notwithstanding the fact that stocks  are still over priced, this analysis of the ten most important Nifty heavy weight stocks takes a look at these stocks on the basis of the recent momentum. The assumption behind this limited analysis is that the immediate momentum is liable to be persistent and on any recovery of the market, these momentum stocks will lead the rally.

Nifty and It's Heavy Weights

The top ten members of the S&P Nifty index, their weights in the index, closing prices and various daily moving averages are given in the table below. The corresponding close and the moving averages of the S&P Nifty index are also given in the table.

The last column of the above table shows the percentage value at which the last close of each stock and the index is being quoted in comparison with their respective 200 day simple moving averages ( 200 DMA ), as a simple measure of  the recent  momentum. Three other moving averages ( 20, 50 & 100 DMAs ) are also made available in the table for a better understanding of the recent momentum. Three stocks, viz. ICICI Bank, SBI and TCS were still quoting more than 20 % above their 200 DMAs as on 12th Nov. 2010 and thereby indicating the highest momentum in the sample. No wonder banking stocks were the leaders of the current upsurge even though ICICI Bank was a late entrant. The next three stocks with the highest momentum are LT, HDFC and ITC. HDFC Bank, ONGC and Infosys follow the suit and the last place is secured by the laggard,  Reliance stock.   

Now let us also checkout the charts of Nifty Index and these heavy weights for an even better understanding of the recent price action. ( Hey, it is said that a picture is  better than a  thousand words ! ).  All the charts include a regression channel showing the latest or previous general direction of the price action.  The lower panel of all these charts are showing the various DMAs. 

S&P Nifty Index - Daily Chart

Nifty index is still trading inside the upward moving regression channel. Accordingly, the index may get some support at the interception point of the price with the channel around the 5930 level  which also coincides with the previous minor low. The 10, 20, 50, 100 and 200 DMAs of Nifty index are placed at  6212, 6129, 6023, 5712 and 5408 respectively. In case the present correction prolongs, after some customary rebounds from the supports, for any reason unknown at present, it may get supported near the  100 DMA between the 5700 and 5800 levels.


Although Reliance stock was trading flat for almost an year, the stock exhibited some momentum late in the rally. However, the stock seems to have broken out of the regression channel of the latest upward thrust in the trading range.  The 10, 20, 50, 100 and 200 DMAs of Reliance are placed at  1090, 1084, 1041, 1030 and 1035 respectively. The longer term DMAs of the stock are clustered around the 1035 levels at present. Therefore,  the stock may get support at these levels failing which the stock may reach the previous low at the 950 - 960 levels.


The chart of Infosys shows that the latest upthrust ended a month back and stock has been trading sideways mostly. The 10, 20, 50, 100 and 200 DMAs of Infosys are placed at  3042, 3030, 3022, 2906 and  2780 respectively. Infosys has the first support around 2900 levels which coincides with the 100 DMA and the previous trading range high. The next support may be around the 200 DMA at 2780-2800 levels.

ICICI Bank   

Being a late entrant to the rally on the back of restarting the balance sheet growth as evidenced by the latest quarterly result, ICICI Bank is still trading inside the upward moving regression channel. The stock may get support at the 1150 levels and below that at 1080. In case of a very deep correction, it may  get support at the longer DMAs.  The 10, 20, 50, 100 and 200 DMAs of ICICI Bank are placed at  1246, 1185, 1139, 1034 and  963 respectively.


LT stock is still trading inside the upward moving regression channel even though the stock seems to be reversing from a round top formation on the back of lower than expected growth in the capital goods sector as evidenced by the IIP numbers. The lower suppots of the stock are at 2025, 1925 and 1775 levels. The 10, 20, 50, 100 and 200 DMAs of LT are placed at  2142, 2080, 2025, 1928 and  1760 respectively.


Even though HDFC stock is still trading inside the regression channel,  this stock has mostly been  trading flat recently.  The stock at present is at the support zone of the regression channel and the 50 DMA at 700 -710 levels. The next supports are at the 650 and 600 levels.  The 10, 20, 50, 100 and 200 DMAs of HDFC are placed at  721, 710, 707, 655 and  597 respectively.


ITC stock seems to be reversing from a double top at 180 levels. The stock is trading just above the 50 DMA at 172. The lower supports of ITC stock are at the 165 and 150 levels. The 10, 20, 50, 100 and 200 DMAs of ITC are placed at  175, 173, 172, 163 and  149 respectively.


HDFC Bank too topped out at the end of September and has been in a correction mode since then. The stock is trading below it's 50 DMA at 2371. The lower supports are at 2220 and 2050 levels. The 10, 20, 50, 100 and 200 DMAs of ITC are placed at  2364, 2342, 2372,  2222 and  2036 respectively. 


SBI stock was one of the leaders of the present banking sector lead rally and seems to have fallen out of favour with the investors due to the very disappointing quarterly results. The stock has broken out of the upward moving regression channel and is already trading below the short term moving averages. The lower supports are at 2850 and  2500 levels. The 10, 20, 50, 100 and 200 DMAs of SBI are placed at  3271, 3222, 3191,  2864 and  2502 respectively.  


TCS, having declared the best quarterly results amongst the IT biggies, remains the stock with the highest displayed recent momentum among the top ten Nifty heavy weights. The lower supports of the stock are at the 1000 to 1020 levels and at the 950 to 975 levels. The 10, 20, 50, 100 and 200 DMAs of TCS are placed at  1067, 1045, 972,  900 and  835 respectively.  


ONGC chart shows that the stock topped out in late September and has been in a correction mode since then.  The stock seems to be on a path to the 1230 to 1260 levels. The stock may have lower supports at 1200 and 1150 levels.  The 10, 20, 50, 100 and 200 DMAs of TCS are placed at  1339, 1337, 1368,  1322 and  1208 respectively.  

On the basis of the limited analysis done as above, TCS, ICICI Bank, HDFC, ITC and LT seems to be the best bets for investment from a universe limited to the top ten heavy weights of the Nifty Index. SBI is omitted on the back of the latest  poor quarterly results.  Investors may also go in for Infosys and HDFC Bank with lower weights in the portfolio.

The above conclusion and the recommendation are on the basis of recent momentum and are subject to changes from time to time. All usual disclaimers like 'past performance may not be sustainable in the future', 'consult your financial adviser' etc etc are applicable too.

Cheers and Prosperous Investing !!!


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