Union Budget 2019-20 Preview
Index
Nifty 50
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Nifty Bank
4
Midcap 100
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Nifty Infra
6
Nifty Metal
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Nifty PSE
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2
Union Budget 2019-20 Preview
Nifty 50 (CMP: 11788.85)
Daily Chart
Source: Investing.com
Rationale:
Five months back we had an interim Union Budget which was as good as a non-event for our markets. However post this; our markets
saw some wild swings due to some major developments on the global as well domestic front. In the midst of this, our benchmark
managed to clock record highs to reach yet another milestone of 12000. Markets once again struggled at higher levels and we are a bit
off from the recent peak of 12103.05 and are consolidating around key supports.
Of late, despite several attempts, the Nifty managed to hold key support zone of 11630 - 11591. These levels were critical supports
because11591 is the higher end of the ‘Upward Gap Area’ created post the exit poll numbers. And 11630 being the 161% Fibonacci
retracement levels of the small up move from 11769.50 to 12000.35. This level coincided with the ‘Potential Reversal Zone’ as per the
‘Bullish Wolfe Wave’ structure, which was clearly visible on hourly chart. After last week’s bounce back, the above mentioned technical
evidences clearly proved its significance. Now we are stepping into an eventful week on the global as well as domestic front and hence,
traders are advised to prepare themselves for some bigger swings. It would be really interesting to see how our market reacts on the
global developments in the initial part and then the Union Budget scheduled coming Friday will probably set the tone for the next course
of action for our markets.
Technically speaking, we still remain hopeful as long as 11630 - 11591 are not violated and on the higher side, we will not be surprised to
see move towards 12000 and beyond in next few days. Before that 11850 - 11900 has become a sturdy wall, which needs to be
surpassed convincingly. We hope it be broken in the first half of the coming week, which will trigger some sharp moves in the upward
direction. If things go as per our expectations then Nifty is clearly gearing up for a move towards 12200 - 12400 in next few weeks.
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Union Budget 2019-20 Preview
Nifty Bank (CMP: 31105.20)
Daily Chart
Source: Investing.com
Rationale:
Before the announcement of the Interim Budget on 1st February 2019, we had seen a pullback move in Bank Nifty index of about 13%
from the lows of October 2018. The index then consolidated in a range during the month of January and February. The general
elections results were to be announced in the month of May and the Bank Nifty (along with other indices) witnessed sharp up move
from the first week of March to register new all-time high. The buying momentum continued and the index registered high of 31705
on the day of election results outcome.
The elections results outcome on 23rd May was in line with what the market participants sought. However, as one of the renown
principles of Dow Theory suggest that ‘Price discounts everything’ and post the election outcome, there was profit booking seen which
dragged the index lower by about 1500 points from its high. This correction halted near the 50% retracement support of the previous
up move around 32200 and since then, the index has resumed the positive momentum. The chart structure indicates that probably
the corrective phase within the uptrend has ended at the recent low 30222.85 and the index has now resumed its higher degree
uptrend. Hence, we expect the Bank Nifty to continue its uptrend post the upcoming Budget. In near term, we expect the index first
test its previous high around 31780 and then rally towards 32200/32700 which are the target projections as per the reciprocal
retracement theory.
The Nifty PSU Bank index have given a decent up move in last couple of weeks and after a long consolidation phase, this sector could
well outperform the broader markets in next few months. Amongst stock specific ideas, some of the stocks from the banking sector
have seen significant correction in last few months and we advise traders to avoid bottom fishing in such underperformers. Stocks
such as HDFC Bank, ICICI Bank, SBIN, Federal Bank are likely to continue their trended up move going ahead.
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Union Budget 2019-20 Preview
Nifty Midcap100 (CMP: 17654.10)
Weekly Chart
Source: Investing.com
Rationale:
The midcap space has shown huge underperformance in last one and a half year wherein many of stocks from this space have corrected
significantly from their highs in this period. The Nifty Midcap100 index had given a price-wise correction in the calendar year 2018 while
it has consolidated in a range in this year so far which could be termed as a time-wise correction.
The mid-cap index has consolidated in a range in last few months and such phases forms a base for the next trended phase. The price
wise correction in the Nifty Midcap100 index completed near its ‘200 SMA’ on the weekly chart in the month of October 2018. Since
then, this average has become a sacrosanct and the prices have managed to revert higher whenever they have tested the same. Now,
recently it is observed that the components from this sector have witnessed buying momentum where the price upmoves have been
supported by increasing volumes. This is an indication that the sector could complete its consolidation phase soon and start a trended
upmove to give a catch-up rally to the large cap names. Hence, we believe that the upcoming Budget could trigger an uptrend in the
midcap stocks and hence traders are advised to start buying quality names from this space for next few months. The immediate support
for the index is placed around 17040 whereas resistances is seen in the range of 17800-18000. A breakout above this range should lead
the index towards 18850-19000 in next few months which is target projection as per the extension theory.
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Union Budget 2019-20 Preview
Nifty Infrastructure (CMP: 3369.20)
Monthly Chart
Source: Investing.com
Rationale:
The Infra Index had a sharp rally during the calendar year 2017 from the levels of 2700 to 3748; however, 2018 was disappointing as
Index almost erased all its previous year’s gain to retest levels of 2800. Eventually, the Index bottomed out during October 2018 by
forming a ‘Dragon Fly Doji’ pattern on the monthly chart. The said lows were revisited during the early part of 2019; but it once again
acted as strong demand zone resulting in a bullish reversal pattern known as ‘Hammer’ on the monthly chart.
Now after forming a strong base around 2800 levels, the Index has sharply rebounded in the last two quarters and has now sustained
above the previous swing high of 3200 to confirm a bullish breakout known as 'Double Bottom' pattern. The said breakout is supported
with broad-based buying seen in the major heavyweights like LT, NTPC, Power Grid, Adani Ports along with the other midcap counters.
Technically, looking at the weekly chart, the Index has now started moving in a 'Higher Top Higher Bottom' price formation and going
ahead we sense the northward journey is likely to continue towards the 3500 - 3640 levels. The oscillators, as well as averages, are
positively placed across all major time frames and with all above observations, we have a positive bias on this sector. In such a scenario,
some of the preferred names which have shown good traction in recent times and are likely to continue outperformance in the near
term are CONCOR, CESC, Torrent Power and LT.
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Union Budget 2019-20 Preview
Nifty Metal (CMP: 2980.20)
Daily Chart
Source: Investing.com
Rationale:
Since 2018 Union budget, the entire ‘Metal’ space has undergone massive price correction and since last few months, we are
witnessing another form of correction i.e. a time correction. In our previous budget report (towards the fag end of January), we had
highlighted few technical evidences that suggested a completion of price decline. This was followed by nearly 15% rebound which
eventually got fizzed out in the midst of April. Since last couple of months, we are seeing consolidation which can be termed as a ‘Time-
Correction’ and now, we are seeing some early signs that suggest probably this phase is also going to end soon.
Let’s dig into a bit of technical and see what charts have to say. Recent correction got arrested precisely at the 78.6% retracement of
the previous up move and after spending some time around it, we finally witnessed a breakout from this congestion zone last week.
The ‘Bullish Wolfe Wave’ confirmed during the month of February on weekly chart is still active and going ahead, we would probably
see the actual outcome of this pattern. Hence, we remain upbeat and expect a strong performance from this space in weeks or months
to come.
In our sense, this could probably the last opportunity to accumulate these stocks at such low prices and hence, we advise traders to
accumulate marquee names from this universe. If we have to highlight our preference, we would stick to TATASTEEL, VEDANTA and
JSW STEEL.
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Union Budget 2019-20 Preview
Nifty PSE (CMP: 3657.25)
Weekly Chart
Source: Investing.com
Rationale:
The Nifty PSE Index had a difficult phase during the calendar year 2018 as it sharply corrected from its all-time high of 4445 to the level
of 2965. The said fall, however, got arrested on the key retracement level of 78.6% of its previous sharp rally from 2596 - 4445 and
resulted a bullish reversal pattern known as ‘Hammer’ on the monthly chart pushing prices higher in the recent months.
Now if we observe the weekly chart, the PSE Index is now in a steady uptrend with prices moving in a ‘Higher Top Higher Bottom’
formation. The said Index has also witnessed a bullish breakout known as ‘ Inverse Head N Shoulder’ and with the positive placement of
directional averages i.e. 89EMA & 200SMA we sense the recent upmove in the index is likely to continue towards 3870 - 3950 levels.
The multiple time frame analysis on momentum oscillator RSI with all the three major time frame daily RSI, weekly RSI and monthly RSI
above 50 indicates an overall uptrend in the Index and every dip getting bought into. In such a scenario, strong support for the Index is
placed around 3520 - 3450 levels which are likely to act as strong demand zone on corrections. With all the above evidence, we have a
strong optimism on the PSE index and stocks within the sector like CONCOR, Power Grid, and NMDC are likely to outperform.
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Union Budget 2019-20 Preview
Research Team Tel: 022 - 39357600
6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai - 400 093. Tel: (022) 39357600
Technical and Derivatives Team:
Sameet Chavan
Chief Analyst - Technical & Derivatives
Ruchit Jain
Technical Analyst
Rajesh Bhosale
Technical Analyst
Sneha Seth
Derivatives Analyst
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