Stock picks by Angel Broking: Buy Shriram Transport Finance, Mahanagar Gas

Recently, gas distribution companies have been in limelight

Nifty Outlook 

Nifty reclaims 9,900 with some authority 

Last week, we started the proceedings with a good bump-up on Monday, owing to favorable global cues. However, this ecstasy was short-lived as we witnessed a gradual profit-booking thereafter. Until Thursday’s first half, the index kept gyrating in a very slender range but post the deferment of Supreme Court’s verdict with respect to the adjusted gross revenue (AGR) dues, markets joined hands with global peers. And since they were trading deeply in the red, the Nifty breached the support of 10,000. In fact, things worsened when the US markets plunged more than 5 per cent on Thursday. This resulted in a massive gap-down opening in our markets on Friday. Fortunately, our markets saw a V-shaped recovery throughout the remaining part to conclude the day marginally in the green and thereby restricting weekly losses to a couple of per cent.  

Barring the last two sessions, our market was undergoing a consolidation phase, but the range widened a bit towards the fag end. Broadly speaking, in the midst of all this, our markets retraced recent up move and managed to reclaim the crucial support of 9,900 in a matter of a few trading hours. If you refer to our recent articles, for us, the trend changing level was 9,900 and although it was breached intraday, we will give more weightage for closing levels. Nifty has not only reclaimed it on a daily basis but with Friday’s close, it has been defended the level on a weekly basis as well. Hence, we continue to remain upbeat and construe this decline as a retracement of the recent up move, which was very much needed to provide the strength for the next leg of the rally. As far as supports are concerned, 9,900 continues to be seen as key support on a closing basis. But, with today’s move, we can mention a slightly bigger support zone of 9,900 – 9,544 for the coming week.  

On the flipside, we expect Nifty to again go back to recent highs of 10,150 – 10,300 or may even head towards 10,600 – 10,800 levels. One of the key rationales behind this hypothesis is the overall positioning of the Bank Nifty. Couple of weeks back, we could see confirmation of a positive crossover in ‘RSI-Smoothened’ on the weekly chart. Historically, it's proven that when this kind of crossover happens in this oscillator, it has the tendency to give bigger moves and hence, this observation is adding conviction to our optimistic stance. Also, it would be unfair not to throw some light on the ‘Midcap’ index, which has given a remarkable move on Friday, and, thereby, indicates a strong move in the offing.  

Stock recommendations: 

1. NSE Scrip Code – SHRIRAM TRANS FIN 

View – Bullish 

Last Close – Rs. 684.40 

Justification – This has clearly been one of the laggards over the past few months. It has not participated at all in the overall recovery our markets saw from March lows. But since the last couple of days, most of the underperforming NBFC and Mid cap private banking names started to show some life. On Thursday, despite weak quarterly numbers, stock prices stood firm and on Friday, we saw massive surge when markets started recovering from lower levels. It has already confirmed a breakout on daily chart and the way its positioned, we can see good moves in this high beta name. Importantly, the volume activity has improved drastically in the last couple of days, providing credence to the move. We recommend this stock for a target of Rs.734 – 752 in coming weeks. Traders can keep their stop losses at Rs.658. 

2.  NSE Scrip Code – MGL 

View – Bullish 

Last Close  – Rs.1074.20 

Justification – Recently, all these Gas distribution companies have been in limelight and this being the F&O component, continues to remain our preferred stock from this space. Last week, stock prices confirmed a price-volume breakout from cluster of hurdles. This was followed by a consolidation for few days. And now post its quarterly numbers, the stock seems to have picked up its momentum again. The daily as well as Weekly chart looks extremely promising and hence, we expect a continuation of the ongoing momentum in the stock. One can look to go long at current levels for a target of Rs.1,124-1,150 over the next 14 sessions. The stop loss should be fixed at Rs.1,018.  

Disclaimer: Sameet Chavan is Chief Analyst- Technical & Derivatives at Angel Broking Ltd. Views are personal.