Technical Outlook 2016 - ICICI Directcontent.icicidirect.com/mailimages/IDirect_Technical... ·...

rly a Tee chY ni cal Ou 6t 1l o 0ok 2

Analyst name:Dharmesh Shah Nitin Kunte, CMT Dipesh [email protected] [email protected] [email protected]

Pabitro Mukherjee Vinayak [email protected] [email protected]

December 17, 2015

Treading the Fog will lead to Expressway

Market Outlook Sensex: 25494 Nifty: 7750The major bull market for domestic equities began in the middle of 2013while 2014 was a phenomenal breakout year that yielded strong gains forinvestors. In the larger scheme of things, the primary bull market is stillintact and 2015 was a speed breaker, which tempered down investor’sexuberance, to a large extent.

The correction since March 2015 has seen two interesting trends. FIIs havebeen large sellers on account of flight of capital from Emerging markets.However, this selling has been absorbed by strong buying on part of DIIs.The outperformance across broader markets is explained by this strongbuying trend from DIIs while FII holding remains high in large caps. Theupward momentum in the markets will resume gradually once the outlookof FIIs towards emerging markets improves going into 2016.

We believe the benchmarks (Sensex, Nifty) will resolve higher and headtowards 31000, 9500 in the next 12 to 15 months. Investors with a longterm horizon should start accumulating from current levels and look forportfolio construction rather than opportunistic bottom fishing.

The major long term base for the benchmarks is placed at 23500, 7100levels. We do not foresee the markets sustaining below this value area.Therefore, the current decline presents a favourable reward to risk ratio tostart accumulating from a long term perspective

Recommendations have been given on I-Click to gain

Technical Theme…Going GLO (bal)/ (Lo)CAL Click here

Source: Bloomberg, ICICIdirect.com Research

Top Picks Click hereRead More..

Our statistical model, based on bottom up approach, focused onidentifying three broad categories of stocks:a) Underperformers which are poised at attractive value area but arepresently out of limelight. The stocks selected are mostly companieshaving good global exposure but have underperformed/corrected in thelast one year and are placed attractively on technical dimensions. Thebasket includes the likes of Tata Motors, ITC, IPCA Laboratoriesb) Relative outperformers in 2015 with robust price structure that willextend resilience in 2016 and are mainly confined to domestic/globalnames which include Sonata software, Ramco Cement, TNPLc) Major turnaround in price structure which are mostly contrarian innature and include names like Triveni Engineering, SJVN, EIH

Scrip Buying Range Target Stoploss Upside%Tata Motors 350-368 435 313 21 ITC 305-320 390 288 25 Ipca Laboratories 720-753 948 648 29 Ramco Cement 350-367 448 309 25 Sonata Software 162-171 222 134 33 Tamilnadu Newsprint 223-234 298 192 31 Triveni Engineering 34-36 48 27 37 EastIndiaHotel 117-123 159 99 33 SJVN 27.5-29.3 38 23 36

Long Term 200week EMA

Projected upside towards 31000

Major value area @23500-24000 levels

BSE Sensex Long Term Bar Chart

Confluence of factors that makes us Bullish in CY2016

• Climax of Time & Price correction near…Risk reward has turned favourable: We believe that the breather in 2015 forms part of the larger bull market whichbegan since mid 2013 and provides an attractive incremental buying opportunity for long term investors. We expect the markets to embark upon the next upmove after conclusion of the current corrective phase and head towards 31000, 9500 levels in the coming year

• No one rings bell at the bottom…Initiate positions as major supports approaching: Major corrections within established bull markets present the most attractivebuying opportunities for long term investment. We believe the current correction offers such a lucrative investment opportunity as reward to risk ratio issignificantly favourable after the sizable correction from life highs. We do not foresee the markets going below the major long term value area placed at 23500,7100 (Sensex, Nifty) levels.

• Corrections part of bull market; ignore noise and start accumulating: Historical behaviour of secondary corrections within the framework of a bull market on theSensex over the past decade reveals that out of the 12 major instances of market corrections, on 10 occasions markets have corrected to the tune of 15% to17% from the highs. This implies that normal bull market corrections on domestic bourses have measured around 15% to 17%. After concluding the normalcourse of correction the subsequent three month and six month performance has yielded positive returns on all 10 occasions. In present scenario, thebenchmarks have already completed the normal magnitude of correction and therefore offer a better reward to risk ratio for an investment perspective

• Time wise correction approaching maturity: Our markets have followed peculiar time cycles during major correction phases over the last decade. Since theyear 2003 the two major corrections have lasted precisely for 14 months, post which markets have witnessed major turnaround. The key takeaway for longterm investors from this time cycle behaviour is that major part of correction (March to December 2015 = 10 months) is already behind us. The next 3 to 4months, being the fag end of current correction phase presents the most opportune time to start accumulating fundamentally sound stocks for the long term

• Index performance an optical illusion::Returns Galore for Midcaps/Small caps: The broader markets have consistently outperformed the benchmarks onrelative as well as absolute terms since the outcome of General Election in May 2014. During structural downtrends, the broader markets are generallyhammered down and tend to underperform the benchmarks owing to low risk appetite. However, strength in broader markets during last 10 month correctivephase suggests strong appetite among participants to own stocks even as benchmarks are undergoing a corrective phase

• India, cynosure of all eyes, amid emerging market rout: The Sensex has been a consistent outperformer among the Emerging markets peers over the last fewyears. The flight of capital from emerging markets amid lingering rate hike by US Fed has seen the MSCI Emerging market index register a breakdown belowthe four year consolidation band. Meanwhile the Sensex has been on a gradual descend since March 2015 which is seen as a healthy correction within largeruptrend. We expect the Sensex to continue its relative outperformance vis-à-vis the emerging market peers amid heightened volatility going forward

Read More..

Read More..

Read More..

Read More..

Read More..

Source: ICICIdirect.com Research

Read More..

Climax of time & price correction near…Risk reward has turned favourable

Based on the technical observations appended ahead, we believe the current correction has approached price wise maturity. It is difficult to build a portfolio atprecise market bottoms. However, with a favourable reward to risk ratio, we believe this is an opportune time for portfolio construction from a long termperspective. We expect the markets to embark upon their next up move after the conclusion of the current corrective phase and head towards our target of 31000,9500 levels in the coming year. We believe markets will emulate the performance recorded post the 2014 general election, which was the previous major up move.Such price parity measured from the September 2015 bottom projects upsides towards 31000, 9500 levels. The 123.6% reciprocal retracement of the entirecorrection from life-time high 30024 to 24833 levels is also placed near 31000 , 9500 levels, respectively.


24107Post Election Low

30024

Price parity with post election rally and 123.6%retracement of 2015 correction at 31000

BSE Sensex Weekly Bar Chart


We believe markets will emulate the performance recordedpost the 2014 general election which was the previousmajor up move projecting upside towards 31000 levels

No one rings bell at the bottom…Initiate positions as major supports approaching

Major corrections within established bull markets present the most attractive buying opportunities for long term investment. We believe the current correctionoffers such a lucrative investment opportunity as reward to risk ratio is significantly favourable after the 17% correction from life-time highs. We do not foresee themarkets going below the major long term value area placed at 23500, 7100 (Sensex, Nifty) levels being confluence of following: A) The long term 200 week EMA isat 23425, 7060 levels. The 200 week EMA represents the average price, which has factored in a host of major events and sentiments prevailing in the last fouryears. Therefore, it projects a major long term value area. The markets have respected this long term moving average support during the intermediate correctionsin 2012 and 2013. B) The major sentimental turnaround in 2014 occurred post the outcome of General Elections. The low formed post the Election results (24107,7118) is therefore an important reference point representing the strong bullish sentiment. C) The 50% retracement of the entire rally from 2013 low of 17448 to life-time high of 30024 is also placed at 23736, 7119 levels, respectively


Long Term Value area @ 23500-24000Post 2014 Electionlow @ 24107

200 week EMA @ 2342550% retracement of 2013-

2015 rally @ 23736Post Election low @ 24107

BSE Sensex Weekly Bar Chart

Markets are attractively poised above the long term valuearea and offer a lucrative reward to risk ratio to startaccumulating from a long term perspective

17448

30024


Major corrections & subsequent returns since 2005

Year % Fall3M return

%6M return

%

Mar - May 2005 12 27 43

Oct - Nov 2005 13 31 32

May - Jun 2006 31 33 56

Feb - Mar 2007 16 19 40

Jul - Aug 2007 13 41 28

Jun - Jul 2009 15 20 24

Oct - Nov 2009 12 7 11

Apr - May 2010 12 13 22

Nov 2010 - Dec 2011 29 15 15

Feb - Jun 2012 15 19 23

Jan - Apr 2013 10 7 17

May - Aug 2013 15 19 21

Mar - Sep 2015 17 ? ?

The historical data of secondary corrections within the framework of a bull market on the Sensex over the past decade reveals some interesting statistics. Out ofthe 12 major instances of market corrections, on 10 occasions markets have corrected to the tune of 15-17% from the highs. Only in two instances has thecorrection been deeper in magnitude to the tune of ~30%. This implies that normal bull market corrections on domestic bourses have measured around 15-17%.After concluding the normal course of correction, the subsequent three month and six month performance has yielded positive returns on all 10 occasions.

We believe the secondary correction in force since March 2015 has made the markets healthier by taming down overstretched sentiments developed post thestrong mandate in the 2014 general elections. The markets have already factored in a lot of negatives during the 10 month correction ranging from a slowdown inChinese economy, lack of domestic earnings momentum and imminent US rate hike. Therefore, we believe this is an opportune time for investors to startaccumulating quality stocks to ride the next up move within the larger uptrend.

Corrections part of bull market; ignore noise and start accumulating…


-12%

-13%

-16%

-13%-15%

-12%-11% -15%

-10%-15%

-17%

BSE Sensex Monthly Bar Chart

In the last decade, majority of the bull marketcorrections have been to the tune of 15-17% fromthe highs while subsequent three and six monthperformance have yielded positive returns-31%

-29%

Time wise correction approaching maturity…

Historically, our markets have followed peculiar time cycles during major correction phases over the last decade. Since 2003, the two major corrections have lastedfor precisely 14 months post which markets have witnessed a major turnaround. The first such correction began in January 2008 and lasted till February 2009,precisely for 14 months. Post this correction, the markets entered a sustainable uptrend and went on to challenge the 2008 highs over the next couple of years. Thesecond major correction began in November 2010 and ended precisely after 14 months in December 2011. This correction was the inception point of the currentmajor bull market which has paused since March 2015. The time cycle of major correction in our markets suggest that the current correction beginning March 2015can stretch maximum up to April 2016 post which a major turnaround may be in the offing. The key takeaway for long term investors from this time cyclebehaviour is that a major part of the correction (March to December 2015 = 10 months) is already behind us. The current time wise correction can stretchmaximum up-to April 2016. Therefore we believe this is the most opportune time to start accumulating fundamentally sound stocks for the long term.


Jan’08

Feb’09

Nov’10

Dec’11

Mar’15

14 Months conclude in Apr’16

14 Months 14 MonthsBSE Sensex Monthly Bar Chart

The major correction phases over the last decadehave followed a time cycle of 14 months, postwhich markets have produced major turnaround.

Index performance an optical illusion; returns galore for midcaps/small caps…

Since the outcome of the General Election in May 2014, there has been a clear divergent trend between broader markets and benchmarks. The broader markets asrepresented by BSE 500, midcap and small cap indices have consistently outperformed the benchmarks in relative as well as absolute terms. During structuraldowntrends, the broader markets are generally hammered and tend to underperform the benchmarks owing to low risk appetite. However, in the entire correctivephase since March 2015, the BSE midcap and small cap indices have remained resilient and relatively outperformed the Sensex. The strength in the broadermarkets suggests strong appetite among participants to own stocks even as benchmarks are undergoing a corrective phaseThe broader markets serve as a testament to the true sentiments prevalent in the markets as they constitute a larger section of the market while benchmarkscomprise select leading stocks/sectors. The Sensex universe mostly comprises institutional holding while the broader universe affects small investors. Hence, theperformance of broader market indices like midcap, small cap & BSE 500 vis-à-vis the Sensex represents a broader picture of prevailing market sentiments.

Source: Bloomberg, ICICIdirect.com Research (Charts rebased to 100)

BSE Sensex and Broader markets comparative Chart

------ BSE Sensex

------ BSE 500

------ BSE Mid Cap Index

------ BSE Small Cap Index

In the entire corrective phase since March 2015, theBSE midcap and small cap indices have remainedresilient and relatively outperformed the Sensex

Post 2014 Electionresults Broader marketsentered a different league

Onset of new structural trend :: DII inflows > FII outflows in CY15

One of the key factors behind the resilience and relative outperformance of domestic bourses vs. emerging market counterparts has been the large hearted buyingon part of domestic mutual funds in 2015. After peaking out in March 2015, the markets entered a downward spiral weighed down by FII outflows from emergingmarkets ahead of the impending rate hike by the US Fed. However, our markets have been insulated from the kind of carnage in other emerging markets as mostof the selling by FIIs has been absorbed by domestic mutual fund inflowsThe outperformance of broader markets on all parameters is explained by the fact that FII holding is concentrated more on the frontline space. As a result, whenthe benchmarks have remained southbound, the broader markets have remained in a league of their own helped by strong buying by domestic mutual funds. Weexpect the broader markets to continue their outperformance over the coming year as well. Markets will resume their upward momentum and get into overdrivemode once the FII selling recedes and fresh buying trend resumes

Source: SEBI, Bloomberg, ICICIdirect.com Research

-10000

0

10000

20000

30000

40000

50000

60000

70000

80000

Jan-

15

Feb-

15

Mar

-15

Apr-

15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct

-15

Nov-

15

Dec-

15

FII Net cumulative Figure for 2015 MF Net cumulative Figure for 2015

FII and MF net cumulative net investment figure for 2015

Rs.C

rore

Month

India, cynosure of all eyes, amid emerging market rout…

The Sensex has been a consistent outperformer among Emerging markets peers over the last few years. A look at the price performance of the Sensex and MSCIEmerging Market Index clearly highlights the diverging trend. While the Sensex maintained its rising trajectory after bottoming out in 2013, the MSCI EmergingMarket index remained stuck in a narrow price band and gyrated sideways over the last four years. This highlights the outperformance of the Sensex on a relativeas well as absolute basis. The flight of capital from emerging markets amid lingering rate hike by US Fed has seen the MSCI Emerging market index register abreakdown below the four year consolidation band. Meanwhile, the Sensex has been on a gradual descent since March 2015, which is seen as a healthy correctionwithin the context of a larger uptrend. We expect the Sensex to continue its relative outperformance vis-à-vis the emerging markets amid heightened volatility.


BSE Sensex Monthly Bar Chart

MSCI Emerging Markets Index

Since 2012, the Sensex has remained in a risingtrajectory. The current corrective phase is seen asa retracement after a strong rally

The MSCI Emerging Market Index remained in sideways consolidation modefor over four years since 2012. Recent price developments have seen theEmerging Market index breakdown below the lower band of four year range

Counter trend correction aftersteady rise in 2013-2014

Consolidation breakdown

• In our endeavor to efficiently screen the entire gamut of NSE cash stocksuniverse by applying key technical parameters and factoring in theprevalent market dynamics, we have further enhanced our statistical modelof stock selection

• Our statistical model comprised key parameters of long term pricestructure, momentum, trend gauging parameters and investor participation(trading volumes)

• The first step involved evaluating stocks to run a check in terms of liquidity,trading volumes, compliance, etc, which returned a set of 566 stocks, whicheventually formed basis for our statistical model screening

• In the second stage, the stocks were pooled in three buckets :

a) Underperformers which are poised at attractive value area but arepresently out of limelight. The stocks selected are mostly companies havinggood global exposure but have underperformed/corrected in the last oneyear and are placed attractively on technical dimensions

b) Relative outperformers in 2015 with robust price structure that willextend resilience in 2016 and are mainly confined to domestic/global names

c) Major turnaround in price structure which are mostly contrarian in nature

• The third process involved grading, qualitative check and sectoralsegregation of stocks that filtered down the list to 174 stocks. Moving upthe ladder, we evaluated these set of stocks in terms of favourable reward /risk, peer comparison, avoiding tainted stocks, etc. This further narroweddown the list to 71 stocks. These 71 short-listed stocks represent the blendof positive price structure or major turnaround in price momentum andstocks poised at major value area representing a bargain buy

• We restricted ourselves to analysing the bucket of 71 stocks, which alreadyfulfilled major technical parameters. The sectoral segregation of thesestocks also threw up interesting insights. Sectors with higher representationin the bucket list reflected the inherent strength in that space and presentedan alternate perspective of identifying the sectors that are likely tooutperform benchmarks in the coming year

Stock picks: Our thesis on gauging market internals…

Source: Spider Software , ICICIdirect.com Research

NSE cash stocks Universe (566 Stocks)

Bucketing in three categories: Bargain buy, outperformers, Structural

turnaround

Grading & qualitative check filtration to 174 stocks +

sectoral segregation

Final bucket of 71 stocks

Top Picks 9

Stock picks: How we zeroed on our “Conviction Picks”…


Scrip Name Nse Code Idirect Code Out performer Turn around / Bargain3M 6M 12M Break out Buy

Auto / Auto ancilliaryHero Motocorp HEROMOTOCO HERHON 8.04 1.22 -18.90 √M & M M&M MAHMAH 9.80 7.63 2.78 √Tata Motors TATAMOTORS TELCO 7.20 -11.84 -24.87 √Asahi India Glass ASAHIINDIA ASAIND 11.91 0.90 36.03 √ √

Banking / NBFCBank of Baroda BANKBARODA BANBAR -15.88 6.63 -26.02 √Federal Bank FEDERALBNK FEDBAN -12.21 -18.74 -24.79 √HDFC Bank HDFCBANK HDFBAN 3.78 4.67 13.19 √St Bk of Bikaner SBBJ STABIK 3.74 -2.38 -12.93 √St Bk of India SBIN STABAN -3.68 -10.81 -27.24 √Bajaj Finserv BAJAJFINSV BAFINS 1.37 26.76 48.27 √Bajaj Finance BAJFINANCE BAJAF 5.53 16.63 64.73 √Credit Analysis CARERATING CARE 7.27 -15.71 -10.52 √

Capital goodsAdor Welding ADORWELD ADVOER 27.15 52.47 59.79 √ √Bharat Bijlee BBL BHABIJ 26.28 28.86 -2.81 √Siemens SIEMENS SEIEMEN -11.25 -10.59 30.31 √Triveni Engg & Inds. TRIVENI TRIENG 61.91 132.72 53.12 √

CementIndia Cements INDIACEM INDCEM 15.07 9.66 6.87 √The Ramco Cement RAMCOCEM MADCEM 14.36 18.79 18.45 √

Return Matrix




ConsumptionAsian Paints ASIANPAINT ASIPAI 4.20 23.72 12.79 √Asian Granito ASIANTILES ASIGRA 56.03 47.49 17.50 √ √Butterfly Gandhimati BUTTERFLY GANAP 65.23 77.10 6.27 √Dabur India DABUR DABIND -5.21 5.65 13.40 √ITC ITC ITC 2.01 7.66 -19.21 √Mcleod Russel MCLEODRUSS MCLRUS 5.97 -26.03 -26.25 √Tata Global TATAGLOBAL TATTEA 7.96 4.76 -12.29 √Trent TRENT TRENT 25.13 31.30 2.96 √ √TTK Prestige TTKPRESTIG TTKPRE 2.06 10.23 11.17 √VST Inds. VSTIND VSTIND 6.95 -0.44 -16.60 √

HospitalityEIH EIHOTEL EIH 20.61 22.07 6.04 √Indian Hotels INDHOTEL INDHOT 18.77 12.52 -8.67 √Mahindra Holiday MHRIL MAHHOL 33.77 65.95 52.51 √TajGVK Hotels TAJGVK TAJGVK 38.37 48.33 -0.83 √

InfrastructureAshoka Buildcon ASHOKA ASHBUI 18.72 19.81 47.89 √Bajaj Electrical BAJAJELEC BAJELE -18.83 -30.63 -7.36 √Kajaria Ceramics KAJARIACER KAJCER 37.39 26.40 67.27 √Reliance Infra. RELINFRA BSES 18.30 16.08 -20.45 √

MediaJagran Prakashan JAGRAN JAGPRA 14.13 33.25 5.13 √ √T.V. Today Network TVTODAY TVTNET 20.97 60.48 36.05 √

Return Matrix




MetalGraphite India GRAPHITE CAREVE 2.73 -8.89 -13.92 √Tata Steel TATASTEEL TISCO 1.55 -17.70 -39.25 √

Oil & GasChennai Petro. CHENNPETRO MADREF -8.83 50.93 186.24 √H P C L HINDPETRO HINPET 1.21 18.56 45.23 √Indraprastha Gas IGL INDGAS 1.49 22.16 10.13 √ √Indian Oil IOC INDOIL 2.99 18.14 21.29 √Oil India OIL OILIND -17.56 -21.78 -32.82 √O N G C ONGC ONGC -7.03 -28.96 -36.65 √Reliance Inds. RELIANCE RELIND 10.71 7.46 8.14 √

PharmaAurobindo Pharma AUROPHARMA AURPHA 15.34 28.87 42.13 √Cadila Healthcare CADILAHC CADHEA 10.33 13.82 25.51 √FDC FDC FDC 7.38 57.80 50.59 √Granules India GRANULES GRANUL 25.83 89.27 100.80 √Ipca Labs. IPCALAB IPCLAB 0.61 17.35 2.13 √Unichem Labs. UNICHEMLAB UNILAB -3.20 50.91 9.90 √ √

PowerApar Inds. APARINDS APAIND 7.75 44.31 18.34 √Coal India COALINDIA COALIN -6.94 -20.37 -13.59 √Kalpataru Power KALPATPOWR KALPOW 1.40 4.35 21.68 √NTPC NTPC NTPC 5.73 -2.78 -0.11 √Satluj Jal Vidyut Nigam SJVN SJVLIM 16.53 21.68 20.67 √ √Torrent Power TORNTPOWER TORPOW 10.80 21.79 9.35 √

Return Matrix



TechnologyAccelya Kale ACCELYA KALCON -5.75 -7.19 -11.03 √NIIT Tech NIITTECH NIITEC 32 82 54 35 60 81 √ √

Return Matrix

NIIT Tech. NIITTECH NIITEC 32.82 54.35 60.81 √ √Sonata Software SONATSOFTW SONSOF 25.83 35.08 33.65 √TCS TCS TCS -6.79 -5.36 -3.19 √

OthersT N Newsprint TNPL TAMNEW 31.46 59.13 76.37 √ √Godrej Properties GODREJPROP GODPRO 10.93 30.85 28.01 √ √j pEID Parry EIDPARRY EIDPAR 35.52 13.41 -14.33 √K P R Mill Ltd KPRMILL KPRMIL 6.68 35.86 108.52 √Hikal HIKAL HIKCHE 59.79 34.83 9.60 √Sadbhav Engg. SADBHAV SADENG 20.46 22.01 45.47 √Jet Airways JETAIRWAYS JETAIR 71.94 115.94 41.70 √ √Blue Dart Express BLUEDART BLUDAR -0.29 15.67 18.48 √

Kindly note that only nine stocks highlighted in red box are our recommended stocks. Rest of the stocks are not being recommended by I-Sec in this report but are displayed only to demonstrate stock selection process.


• The sharp correction witnessed during 2015 has brought the share priceof Tata Motors at the major long term value area and thereby created agood investment opportunity with favourable reward to risk ratio to ridethe next up move

• After a strong rally during August 2012 – January 2015, (| 194-605), thestock entered a corrective phase inline with the benchmarks. The sharpvelocity of decline got arrested precisely near | 300 region which is amajor value area. The stock has formed multiple lows around |300 regionbetween August and October 2015 which is indicative of selling pressuregetting absorbed at the major value area. The confluence of followingtechnical parameters converging near | 300 region makes this a solidbase for the stock :

The rising 89 months EMA, which has acted as a major supportduring the entire rally since 2009 was than placed at 290 levels

The long term trendline joining the low s of 2009 (| 23) and (|2011 (| 142) was also placed at | 296 levels

The 61.8% retracement of the 2011 -2105 rally from | 125 to |605 is also placed at | 305 levels

• The stock reversed its seven month sequence of lower high lower lows inOctober 2015 and also broke the upper band of the steep falling channelencompassing the entire decline during 2015 thereby signalling end ofthe corrective phase and resumption of uptrend. The recent throwback tothe breakout area of |360 provides a good entry opportunity for mediumterm perspective. We expect the stock to resolve higher from hereon andhead towards | 445 levels over the medium term being the 50%retracement of the entire decline from | 605 to | 279 levels which alsocoincides with the July 2015 swing high placed at |447 levels

Call has been initiated on i-Click to Gain on December 14, 2015 at 10:55 hrs

Tata Motors (TELCO): Attractively poised above long term value area....

Source: BSE, Bloomberg, ICICIdirect.com Research

CMP: |380.00 Buying range: |350.00-|368.00 Target: |435.00 Stop loss: |313.00 Upside: 21 %

The share price has registered a falling channel breakoutindicating reversal of trend and resumption of mediumterm uptrend in the stock

142

Monthly Bar Chart 605

50% @ 445

The stock rebounded from theconfluence of major supports:-89 Months EMA-Long term trendline support

23

Market Capitalisation | 109750 crore Equity capital | 679 croreFace value 2 52 week H/L |381.98/ |200.2050 day EMA - | 389 200day EMA - | 392 52 week EMA |420

• The share price of ITC remains in a long term structural uptrend asdefined by the rising peaks and troughs on all time frames. The stockentered a corrective phase after hitting an all-time high of | 391 inFebruary 2015. We believe the current decline has not altered the largerstructural bull trend. Hence, the current reversion of price to key valuearea offers a lucrative buying opportunity for medium term investors toparticipate in the structural up trend

• The correction from the life-time high over the past ten months has ledthe stock to test the major value area placed near | 300 levels. The stockhas attracted strong demand around |300 region on multiple occasionsover the last two years and every time has produced a firm reboundwhich highlights significance of the support region being the confluenceof the following technical parameters:

The lower band of the long term rising channelencompassing the entire movement since August 2013 tilldate is currently placed near | 300 levelsThe 78.6% retracement of last major rising segment fromAugust 2013 to February 2015 (| 270 – 391) is placed at |298 levelsAmong long term moving averages, the rising 34 monthsEMA is currently placed at | 310 levels

• Considering the overall positive price structure and placement of theprice at major value area, we believe the stock offers a good entryopportunity with decent reward/risk set-up. We expect the stock tobottom out at current levels and resolve higher to test the all time highplaced at 391 levels over the medium term horizon

• Among oscillators, the 14 month RSI is sustaining above its bull marketsupport reading of 50 highlighting overall positive price structure

Call has been initiated on i-Click to Gain on December15, 2015 at 12:31 hrs

ITC (ITC): Consolidation near the long term support…



Monthly RSI is sustaining above the bull market supportreading of 50 highlighting overall bullish trend in price

The current reversion of price to keyvalue area offers a lucrative buyingopportunity for medium term investors

78.6% @ 298270

Monthly Bar Chart

375

391

34 Months EMA

Market Capitalisation | 258243 crore Equity capital | 803 croreFace value 1 52 week H/L |409.95/ |29450 day EMA - | 334 200day EMA - | 333 52 week EMA |334

• The share price of Ipca Laboratories peaked well ahead of the pharmapack as it registered a life high of |906 in February 2014 and thereafterentered a secondary corrective phase. The two year corrective phasewas preceded by a three fold rise from |225 to |906 between 2011 to2014. We believe the prolonged correction has approached maturity andthe stock is set to resume its upward trajectory thus offering a freshopportunity for medium-term investors to position themselves for thenext up move

• From a structural view point, the stock is in a secular uptrend formingrising peak and rising trough on the long term price chart. The correctivedecline from the February 2014 high of |906 got arrested near the majorsupport level of | 620. The stock witnessed a decent basing formationabove its key value area for over six months since the start of 2015 whichhighlights accumulation by stronger hands at the major support beingthe confluence of the following technical parameters:

The rising 34 months EMA, which has acted as a major supportduring the entire rally since 2009 was than placed at 620 levels

The 61.8% retracement of the last rising segment from | 440 to |906 was also placed at | 618 levels

• Time wise, the last rising segment during 2013-14 panned out over 12months, whereas the 22 month corrective phase from March 2014 to tilldate could retrace just 61.8% of the preceding rally price wise. Elongatedtime-wise correction and limited price damage is the primary trait of astrong bull market

• We believe the stock provides a good entry opportunity from a medium-term perspective with favourable reward / risk equation. We expect theshare price to resolve higher from hereon and head towards | 970 levelsin the medium term being the 123.6% retracement of the entirecorrective decline since March 2014 from | 906 to | 609 levels


Ipca Laboratories (IPCLAB): Corrective phase approaches maturity....



After a decent basing formation abovemajor value area, the stock is attractivelypoised from a medium term perspective

906

Monthly Bar Chart

440

Monthly RSI is seen reversing from the bull market supportarea of 50 and is seen sustaining above its signal line

123.6% retracement@ 970

Base formation above majorvalue area highlightsaccumulation by stronger hands

Market Capitalisation | 9422 crore Equity capital | 25 croreFace value 2 52 week H/L |887/ |59250 day EMA - | 755 200day EMA - | 732 52 week EMA |728

34 month EMA

61.8% @ 618

• The stock is emerging out of its major one year consolidation pattern inthe range of |176 – |116 levels to mark an end of the secondarycorrective phase and resumption of the long term up trend. The breakouthas set the tone for continuation of price momentum into the comingyear, thus offering a decent investment opportunity

• After the strong multi-fold rally during May 2014 – March 2015, (| 37-176), the stock entered a sideways corrective phase. The selling pressuregot absorbed precisely near key support area of | 120 levels. The stockformed multiple bottoms around |120-130 region which highlightsaccumulation at the major value area which is the confluence of followingtechnical parameters:

The 38.2% retracement of May 2014- April 2014 rally (| 37-177) was placed at | 121 levelsThe 12-months moving average which is in rising trajectory was than placed at 120 levels which has now moved up to | 145 levelsThe medium term rising trendline joining the major lows since May 2014 was also placed near | 120 levels. The value of this base line has now shifted to 147 levels

• After the bullish breakout from one year consolidation we believe thesupport base has now shifted from | 120 to | 145 levels. We expect thestock to ride the positive momentum in 2016 and therefore providesgood investment opportunity. The measuring implication of the pricebreakout projects upside target of | 236 levels (176-116 = 60 points) asprojected from breakout area of | 176 (176+ 60 = 236)

• Monthly MACD oscillator remains in a rising trajectory depicting a stronguptrend. The MACD is currently seen rebounding after taking support atits nine month average and validates the breakout on price front


Sonata Software (SONSOF): Entering new bull phase.…



Monthly MACD in rebounding after taking support at itsnine period’s average and supports the price breakout

Breakout from one year consolidationband opens the door for a rally towards|236 levels over the medium term

116

Monthly Bar Chart

176

37 12 Months EMA

Measuring implication ofrange breakout @ 236

Market Capitalisation | 1814 crore Equity capital | 11 croreFace value 1 52 week H/L |182.60 / |12050 day EMA - | 159 200day EMA - | 147 52 week EMA |143

• The breakout above bullish flag pattern developed on the monthly pricechart provides the platform for a strong up move going into 2016. A flagformation is a bullish continuation pattern which marks a temporarybreather after a strong advance as bulls take a breather. Breakout fromthe pattern along with volume confirmation signals continuation of thepreceding uptrend

• After a strong rally in 2014 from a low of |55 to the 52-week high of | 131the stock entered a sideways corrective phase since January 2015.Pictorially, the sideways consolidation over the last one year appears tohave taken the shape of a bullish Flag pattern. The base of the Flag isplaced at the major support levels of | 96 being the 50% retracement ofthe previous major rally from | 55 to | 131, which also coincides with the34 month EMA currently placed at | 96

• The current breakout rally from the support level of | 96 has seen thestock completely overhaul its preceding decline, which took nine monthsbetween January 2015 and September 2015 in just three months. Suchprice/time behaviour is the trademark of a structural uptrend and augurswell for the stock, going forward

• We expect the stock to ride the new found momentum into 2016 andhead towards target of | 172 as it is the pattern implication of the Flagbreakout that is the height of the pole (131-55=76 points) as projectedfrom the base of the Flag | 96 (96+ 76=172)

• The volume behaviour supports the uptrend in price as the rally in 2014and the recent breakout above the bullish Flag pattern was accompaniedby strong volume of nearly double the 12 months average volume of 28lakh shares per month which highlights larger participation in thedirection of primary trend


East India Hotels (EIH): Bullish Flag breakout…


CMP: |122.00 Buying range: |117.00-|123.00 Target: |159.00 Stop loss:| 99.00 Upside: 33 %

The share price recently registered a bullish Flag breakoutwith a significant rise in volume indicating a resumption ofthe medium term uptrend

50% @ 96

131

Monthly Bar Chart

55

Monthly RSI has given a bullish crossover above its9 period average supporting the price breakout

34 Months EMA

Measuring implication of Flag breakout @ 172

Market Capitalisation | 7013 crore Equity capital | 114 croreFace value 2 52 week H/L |136 / |95.6550 day EMA - | 115 200day EMA - | 108 52 week EMA |107

• The stock is at the cusp of breaking out of a 16 month consolidationthereby marking an end of the secondary corrective phase and signallingresumption of the long term up trend. The breakout has set the tone forcontinuance of price momentum in the coming year, thus offering adecent investment opportunity

• The long term price chart of Ramco Cement represents a well establisheduptrend as the stock moves northwards in a rising peaks and troughsmanner. The stock had given a long term Cup & Handle breakout in themiddle of 2014. Since then, the neckline of the Cup & Handle pattern hasreversed its role and acted as strong base during the corrective phase inthe entire 16 month consolidation as can be seen on the adjacent chart

• While the 2014 rally from | 154 to | 378 was swift and occurred just 10months, the subsequent corrective consolidation took 13 months andretraced only 50% of the preceding rally. Such a price/time behaviour isthe hallmark of a structural uptrend and augurs well for the stock, goingforward

• We expect the stock to resume its primary uptrend and travel towards |458 levels over the medium term as it is the 161.8% extension of theprevious rally from | 275 to | 379 as projected from the recent trough of| 291 projects upside towards | 458 in the medium term

• The monthly 14 period RSI is sustaining above its bull market supportlevel of 50 during the entire consolidation and has recently generated abullish crossover, thus validating the positive trend in price


Ramco Cement (MADCEM): Resolve past 16 months consolidation....


CMP: |373.00 Buying range: |350.00-|367.00 Target: |448.00 Stop loss: |309.00 Upside: 25%

Breakout from 16 monthconsolidation opens upsidetowards | 500 levels in thecoming year

50% @ 275

161.8 % extension @ 458

Monthly RSI sustained above bull market support level of 50 during entire consolidation

379

154

261226

Monthly Bar Chart


• The strong upsurge in 2015 has signalled a long term reversal of fortunesfor the share price of Tamil Naidu Newsprint & Papers (TNPL). The stockhas registered a resolute breakout the major seven year long trendlineresistance drawn off the previous major highs of 2008 (| 125) and 2010 (|138) and 2014 (| 165). The breakout above a rising trend line signals amajor shift of momentum in favour of the bulls triggering a structuralturnaround

• Structurally, the breakout rally since April 2015 saw the stock post afaster retracement of its last down leg as it recouped a nine months fallfrom July 2014 to March 2015 in just three months. Faster retracement ofthe last falling segment and the resulting breakout past multi-year trendline has larger bullish implication for the stock, going forward

• The behaviour of volumes is testament to the changing dynamics of thelong term price trend. The entire rally of 2015 has garnered stronginvestor participation as average monthly volumes since July 2015 (80lakh shares) have been more than double of its 12 month averagevolume of 34 lakh shares. Expanding volumes in the direction of pricesignals strength in the underlying trend and augurs well for longevity ofthe up move

• We expect the stock to ride the new found momentum into 2016 as welland remain on course towards target of | 310 being the price equalitywith the April to August 2015 rally (|116 to |212) as measured from theSeptember 2015 bottom of |170 levels

• Among oscillators, the monthly MACD remains in a rising trajectory andis diverging from its 9 month average signalling strength in the currentup move


TNPL (TAMNEW): Entering new bull phase…



Monthly MACD is diverging from its 9 periodaverage suggesting strong upward momentum

Sharp surge in volumes in the entire rally of 2015signals strong investor appetite for the stock

Breakout past the multi-year trendline indicates amajor shift of momentum in favour of the bulls

Price parity @ 310

138

165

125

Monthly Bar Chart

212

70

112


• The share price of Triveni Engineering has witnessed hectic price andvolume action in the last quarter of 2015 which has potentially triggered astructural turnaround. The stock has reversed its prolonged downtrend ofnearly eight years by resolving past the most dominant falling trend linein place since January 2008

• Structurally, the strong recovery during second half of 2015 led to thefaster retracement of the last major falling segment as the twelve monthsdecline from June 2014 high of | 35 to June 2015 low of | 15 wascompletely overhauled in just four months. The faster retracement of amajor down leg in less than half time period of the preceding declinesignal a change of guard from a long term horizon

• During mid of 2015 the stock witnessed a steady base formation at longterm support level | 15. Over the last seven years the stock has attractedstrong demand at the |12 to |15 price band and formed multiple bottomsaround the same and produced a swift rebound on every occasion. Ithighlights accumulation by stronger hands at the major value area. Therecent base formation and subsequent breakout rally has witnessedstrong volume participation thus indicating larger participation at thelong term support level

• We believe the stock has entered a new bull phase which will continueinto the coming year as well. We expect the stock to head towards | 52levels over the medium term being the 61.8% retracement of the entire2008-2013 decline from | 78 to | 11 levels, which also coincides with thehigh of 2010

• Monthly MACD is in strong uptrend sustaining above its trigger line andis seen taking support near its nine period’s average thus validates thepositive trend in price


Triveni Engineering (TRIENG): Long term trendline breakout…

Source: BSE, Reuters, ICICIdirect.com Research


61.8% @ 52

64

35

Monthly Bar Chart

11

Monthly MACD in uptrend sustaining above itstrigger line suggesting positive bias in price

15


12 month fall

4 month rally

Breakout rally accompanied by sharp volumes

• The resolute breakout past the major consolidation pattern of over 17months has set the tone for a strong bull run into 2016. The stock hadbeen gyrating between the broader range of | 21.00 - | 26.50 levels sinceMay 2014 till September 2015. The strong breakout in October andsubsequent re-test and rebound from breakout level in November 2015has re-confirmed the structural shift of momentum in favour of the bulls

• After a strong rally during August 2013 – May 2014, (| 17.00-26.50), thestock price entered a sideways consolidation phase. The selling pressuregot absorbed near | 21.00 and the stock witnessed a steady baseformation around the same which was the confluence of followingtechnical parameter:

The 61.8% retracement of August 2013- May 2014 rally (| 17.00-26.50) was placed at | 20.80 levelsThe 21-month moving average, which is in a rising trajectory was then placed at 21.50 levels

• Structurally, the 2013-14 rally (| 17.00 to | 26.50) was swift and took onlynine months to pan out, the subsequent corrective consolidationconsumed 17 months while retracing only 61.8% of the preceding rally.Such a price/time behaviour indicates strong bullish uptrend and augurswell for the stock, going forward

• We expect the stock to ride the new found momentum into 2016 andremain on course towards the target of | 38.00 levels as it is the 123.6%extensions of the preceding major rally from | 17.00 to | 26.50 asprojected from the recent major trough of | 22.50

• Monthly MACD is in a strong uptrend forming a higher high and takingsupport at its nine period average, thus validating the positive price trend


SJVN (SJVLIM): Breakout above 17 months consolidation.…


CMP: 29.00 Buying range: |27.50-|29.30 Target: |38.00 Stop loss: |22.70 Upside: 36 %

Monthly MACD in uptrend taking support at its nineperiod’s average thus supports the positive trend in price

Breakout above the long term consolidation has set the tonefor continuation of price momentum into the coming year

26.50

Monthly Bar Chart

17.00

22.50

21 Months EMA

123.6% extension @ 38.00


Sectoral Report Card - 2015


Index Value 1 Month % Change 3 Month % Change 6 Month % Change YTD % Change

Sensex 25,494 -1.03 -1.81 -4.47 -7.29

BSE Auto 18,036 -1.72 3.08 -0.30 -3.19

Bankex 18,907 -3.80 -2.72 -6.26 -11.89

Capital Goods 13,933 -2.77 -10.67 -16.51 -9.77

Consumer Durables 11,993 -0.32 17.87 20.42 23.98

FMCG 7,722 -1.12 1.14 5.16 0.23

Healthcare 16,411 -0.08 -4.77 5.05 11.94

IT 10,959 1.31 -1.73 3.99 3.30

Metal 7,074 -0.09 -2.35 -22.61 -34.21

Oil & Gas 9,217 4.50 6.31 -2.58 -6.85

Power 1,844 -0.64 0.43 -7.87 -11.89

Realty 1,288 -0.48 -0.64 -5.33 -17.20

BSE 500 10,334 -0.29 -0.46 -1.44 -3.62

BSE Midcap Index 10,743 0.62 1.80 5.35 6.01

BSE Small Cap 11,363 1.63 6.34 6.65 1.86

Sectoral prognosis, from relative strength perspective

NSE Midcap Index NSE Midcap Index Quarterly Bar Chart

The midcap index has outperformed the benchmarks during the entirecorrective phase in 2015. While the benchmarks entered a southwardtrajectory since March 2015, the midcap index merely moved sidewayswhile maintaining a positive bias. The strength in the underlying trend canbe gauged by the fact that the midcap index scaled new life-time highs inAugust 2015 while benchmarks were forming lower highs and lower low.

The overall price structure remains bullish for the midcap index. Thenarrow consolidation over the last four quarters was preceded by a strongfive quarter rally in 2014-15. We believe the index has undergone a higherbase building process while maintaining a positive bias, which will act as alaunch pad for the next up move.


The major development on the RSC chart is that the mid cap index hasregistered a resolute breakout past the long term consolidation band. Theentire movement of RSC indicator since 2005 till recently occurred in arectangular formation which indicated an in-line performance along withthe benchmarks for a prolonged period.

The resolute breakout from 10 year consolidation band on RSC implies alarger structural turnaround, which provides impetus for the midcap indexto continue its outperforming streak over the coming years. This will bethe space to watch in the coming year.

NSE Midcap vs. Nifty Relative Strength Comparison


BSE Auto Index BSE Auto Monthly Candlestick Chart

The gradual descent in 2015 saw the Auto index approach the lowerboundary of the long term rising channel. The confluence of 12 monthmoving average near the lower band of the bullish trend channel triggeredvalue buying in this space.

The long term price structure of the Auto index remains firmly bullish asprices continue to form rising peaks and troughs suggesting consistentdemand for auto stocks.

We believe the pullback in 2015 provides a good entry opportunity forlong term investors to position themselves for the next upward journey.We expect the Auto Index to enter the overdrive mode in the coming yearand outperform the benchmarks


The trajectory of the long term Relative Strength Comparative (RSC)indicator is firmly bullish as depicted by the channelled up move on largerdegree charts. The rising trend in RSC implies the sector is outperformingthe general market, i.e. it is either rising faster than the benchmark in anup trending market or going down less, in a down trending market or evenrising

The RSC line has resumed its upward trajectory after testing the lowerboundary of the major rising channel during the current year. It impliesresumption of relative outperformance vs. the benchmarks over thecoming year

BSE Auto vs. Sensex Relative Strength Comparison

Auto index rebounding from the lower band oflong term rising channel presents a good entryopportunity for long term

RSC remains in a rising trajectory on the longterm charts signaling a consistentoutperforming streak vis-à-vis the benchmarks


Nifty Bank Index Nifty Bank Index Quarterly Bar Chart

The Nifty Bank index peaked out in January 2015. Thereafter, it followed achannelled descent. The banking index was the leader in the 2013-14 bullrun. As a result, when the markets took a turn, the banking space emergedas underperformer weighed down by profit bookings after the strong run-up

Structurally, the 2013-14 rally, which took five quarters was retraced byjust 38.2% while taking nearly four quarters. Limited price correction andlarger time wise correction confirm the larger degree positive structure.We do not foresee the index breaking its major base of 16000-15700 beingthe confluence of long term base line joining the 2009 and 2013 lows,38.2% retracement of the 2013-14 rally at 16000 and lower band of thefalling channel at 15700. We expect the index to respect this base andeventually resolve higher to challenge its life-time high of 20900 over thecoming year


The long term trajectory of RSC indicator is positive as depicted by achannelled up move on the larger time frame charts. After a two yearphase of strong outperformance vis-à-vis the benchmarks, the RSC turnedsideways in 2015 and oscillated in a narrow band suggesting aconsolidation phase leading to relative underperformance

Considering the long term positive trajectory of the RSC, the sidewaysmovement in 2015 represents a breather within an established uptrend. Asthe sector remains in a secondary consolidation phase, we believe it willemerge as a market performer over the coming year

Nifty Bank Index vs. Nifty Relative Strength Comparison


BSE Capital Goods Index BSE Capital Goods Index Quarterly Bar Chart

The two distinct highs in March and July 2015 at around the 18800 regionresulted in a bearish Double Top formation precisely at the upper band ofthe long term sideways trending channel. The break below this patternimplies that the sector is set to remain in a consolidation phase in thecoming year amid stock specific action

A structural turnaround will occur once the index posts a decisive closeabove the upper band of the long term sideways trending channelcurrently around 20000 levels


On the long term charts, the RSC indicator has run into stiff resistance atthe previous major breakdown area of 0.65 reading. The indicator failed tosteer past this resistance despite twin efforts in 2014 and 2015. Thechange of polarity principle is clearly at work as the previous support zonehas now reversed its role and is now acting as a strong barrier

The capital goods sector will come back into the limelight once the RSCline decisively thrusts above the 0.65 reading. Until then, broaderconsolidation and relative underperformance is expected to continue inthis space

BSE Capital Goods vs. Sensex Relative Strength Comparison

The previous major support has reversed itsrole and posing major resistance on the RSCimplying further underperformance


NSE FMCG Index NSE FMCG Quarterly Candlestick Chart

The FMCG index has undergone time wise correction for over fivequarters while price wise the index has been building a steady basearound 19000 region. Limited price wise correction and elongated pricewise correction is the primary trait of a healthy bull market correction.

The long term price structure for the FMCG index remains positive. Webelieve the breather in last five quarters has helped in hiving off theoverstretched sentiments developed after the strong rally over thepreceding years. After moving out of the limelight amid an extendedconsolidation phase, this sector presents an attractive buying opportunityand a favourable reward/risk for the long term perspective.


The RSC indicator reversed lower in 2014 after apprehending its long termpeak of 3.10 reading. The sideways consolidation in 2015 and the resultingrelative underperformance has seen the RSC approach its long term baseline joining the lows since 2007. An elongated price consolidation andpositioning of RSC at major support provides the platform for a gradualpullback rally going forward.

The sector will come back into limelight once the RSC conquers itsprevious major peak of 3.10 as that would also result in a breakout fromlong term rounding pattern. Such a breakout will herald a new phase ofsteady outperformance vis-à-vis the benchmarks

NSE FMCG vs. Nifty Relative Strength Comparison

The five consecutive indecisive candlestickformations on the quarterly chart highlight the majorconsolidation and higher base building process


NSE IT Index NSE IT Quarterly Bar Chart

The IT index is at the crossroads after remaining in sideways consolidationmode for the entire year in 2015. After the sideways movement for the lastfour quarters the index has now approached its long term rising base linedrawn off the major lows of 2009 and 2013. A decisive close below thebase line and lower band of last four quarters (10800) will result inviolation of the larger uptrend in force since 2009. Such a price action willsignal a reversal of the primary uptrend and lead the index into aconsolidation phase over the coming year.

To uphold the larger bullish price structure, the index needs to protect10800 and strengthen above the upper band of the last four quarters(11300) as that would result in continuation of the bullish price trend.


On the long term charts, the RSC indicator is ambivalent on directionalbias as it continues to oscillate in a contracting triangle pattern from 2009till date. It indicates that the IT index has remained a market performerover the years i.e. performed more or less in line with the broader indices.

Based on the observations on RSC indicator, we believe the IT index willcontinue to remain a market performer over the coming year as well

NSE IT vs. Nifty Relative Strength Comparison

The IT index is poised at a crucial junctureabove its long term rising base line

RSC remains ambivalent of direction as it movesin a contracting triangle pattern implying an in-line performance vis-à-vis the benchmarks


BSE Metal Index BSE Metal Index Quarterly Bar Chart

The entire price action since 2009 till date has occurred in a well definedsymmetrical triangle pattern as highlighted in the adjoining long term pricechart. The BSE metal index has breached the lower boundary of the longterm Triangular consolidation pattern which signals further deterioration inprice structure

We believe the metal index will continue to gyrate lower during thecoming year and remain an underperformer in relative as well as absoluteterms. Periodic pullbacks from oversold conditions may not be ruled out.However, the primary trend remains down


The trajectory of RSC indicator on the long term chart remains downimplying consistent underperformance on a relative basis vis-à-vis broaderindices. Since 2010, the RSC line has been forming lower peaks andtroughs confirming the inherent weakness in the trend.

The pullback in 2014 along with a rally across markets saw the RSC linefizzle out at the previous major breakdown area. The placement of RSC athistorical low readings can lead to temporary pullbacks in the near term.However, we do not foresee a major turnaround in the directional weaktrend. The index is expected to continue its relative underperformanceagainst the benchmarks.

BSE Metal vs. Sensex Relative Strength Comparison

The breakdown below the lower band ofTriangle pattern signals continuation of thedownward bias over the coming year

RSC remains in a downward trajectory onlong term charts signaling continuation ofthe relative underperformance


BSE Oil & Gas Index BSE Oil & Gas Quarterly Bar Chart

The long term price movement since 2009 till date has occurred in asideways moving parallel channel, which highlights a larger range boundtrend for the BSE Oil & Gas index.

The index is currently poised at the lower boundary of its long termsideways trending channel. The sector may not be in the limelight due toprolonged underperformance since 2009 till date. However, the currentpositioning at the lower band of channel provides a good reward/risk set-up to ride the pullback rally in the upcoming year.


The RSC line has remained in a southward trajectory since 2009 till dateinline with the range bound trend on the price front highlighting therelative underperformance of this sector over the last five years.

The key observation in the current year is that the RSC has formed apotential double bottom while prices remained in a downward trajectory.It is an early indication of relative strength emerging in this space. Webelieve the RSC moving past the long term downward sloping trendlinewill trigger a positive turnaround and lead to relative outperformance inthe coming year

BSE Oil & Gas vs. Sensex Relative Strength Comparison

RSC has formed a potential Double Bottom. Astrong thrust past the overhead trendline willbe required to trigger a positive reversal


NSE Pharma Index NSE Pharma Monthly Candlestick Chart

The dream run in the Pharma index over the last four years has finallyshown signs of fatigue as the index struggled in a range for over eightmonths since April 2015 and breached the lower band in November 2015.The index has also closed below its 12 month EMA for the first time since2012. This signals a definite pause in the long term uptrend. The index isset to enter a consolidation phase in the coming year.

The strong bull run over the last four years has seen the pharma spacegarner multi-fold returns for investors. We believe the after the initialround of profit bookings the Pharma index will enter a time correctionphase which will lead to relative underperformance over the coming year.


The halt in upward momentum on the price front has resulted in the RSCindicator registering a breakdown below the rising trend channel in placesince 2014. The violation of the two year rising channel has triggered areversal of the preceding outperforming trend and implies that the sectorwill underperform the benchmarks, going forward.

We expect the RSC to enter a downward trajectory, going forward, andhead to test its long term rising trendline over the coming year.

NSE Pharma vs. Nifty Relative Strength Comparison

Breakdown below eight monthrange and violation of 12 monthEMA signals a pause in the longterm uptrend

RSC breakdown below the rising channel signalsreversal of the outperforming trend and impliesthat sector will underperform going forward

• The rupee has been on a depreciatory path against the US$ since the May2014 bottom of 58 levels. However, in the last few months, the rupee hasdisplayed resilience by outperforming most emerging market peers. As theUS Federal Reserve prepares to tighten monetary policy, shifts in globalinvestor sentiment and portfolio rebalancing moves will continue to impactthe rupee over the coming months. While the road ahead appears turbulentowing to external factors, we have examined the price chart of US$-INR pairto decipher the medium term direction for the rupee. A closer look at thelong term charts of rupee/US dollar Cross throws up some interestinginsights

• Over the last seven years (since 2008), all major declines in the rupee havemeasured ~30% while each subsequent relief rally has been retracedfaster, which reflects a firm down trend. However, the key technicalattributes during the current decline since May 2014 point towards astructural turnaround. Price wise, the rupee has so far retraced itsSeptember 2013 to May 2014 (68.85 - 58.30) rally by ~80% whereas timewise it has taken 16 months to retrace nine month rally. Lack of fasterretracement, the first since 2008, suggests this is just a pullback, which isdevoid of strength on the downside. This price/time behaviour highlights astructural shift implying build-up of strength in the rupee and toppingformation for US dollar

• The entire decline since May 2014 is in a well defined channel with thelower band of the channel currently placed at 64 levels. Given theimproving structure, we expect the rupee to appreciate outside this channeland head towards the 62 zone being the 61.8% retracement of the May2014 – September 2015 decline (58-67)

• The declines in the rupee are likely to be capped at 67-68 zone as they arethe significant swing lows of September 2015 and August 2013

Rupee (66.72): Bottoming out for rally towards 62...


68.845

58.335

44.026

52.180

47.045

39.173

30% move & Faster retracement



57.327

Lower band ofchannel @ 64

USD-INR spot monthly bar chart (Inverted)

We expect rupee to break past the trend channel andappreciate towards 62-60 levels over medium term

• The Gold prices extended their bear cycle on expected lines to close theyear 12% down. The overhang of the prospect of rising US interest ratesthrough out 2015 has kept bullion prices at bay as US dollar continued totrade at its five year highs. As the year draws to an end and US FederalReserve looks almost certain of ending the decade long low rate regime,entire precious metal complex is seen trading at its multi year lows

• After a multifold rally from $254-$1921 between 2001–2011, Gold pricesbreached the long term up trend line support during 2013 signallingprolonged period of correction. So far Gold prices have corrected over 40%since its' peak in 2011 and continue the descent in a down ward sloppingchannel. (Refer adjacent chart). The falling peaks and troughs formation onyearly charts indicates well established down trend for yellow metal prices

• Going forward, we expect the gold prices to remain under pressure as longas it trades in a down ward trend channel which encompass the price actionover past two years. Although inter mediate relief rallies from the supportlevels may not be ruled out, we expect the upsides to remain capped at $1220 being upper band of the down ward slopping channel and 50%retracement of 2014-2015 decline ($1392-$1050)

• We expect bullion to gradually drift towards $ 970 levels over the mediumterm. The confluence of key technical factors converging around $970 makethis a key support for gold over the coming year based on the followingobservations:

The value of lower band of the medium term down trending channel is placed at $970 levelsThe 50% correction from life time peak ($1921) is also placed at $965 levels

• We believe Gold prices will remain under pressure and continue their downward bias with a target of $ 970

Gold ($1072): Bullion underperformance to persist...


Gold Yearly Bar chart1921

252

Support @ 970- Lower band of Channel- 50% correction from top value

Multi year support trend line

Breach of long term support line during 2013 signaled prolonged correction after a decade long bull market

418

1392

• Brent prices hit the lowest levels since 2007 to end the year 2015 on a weaknote. There is no mystery in the huge under performance of Oil prices asglobal commodity rout sighting higher US dollar, inventories in developedcountries soaring to record highs and anticipation of Oil supply from Iranfrom beginning of 2016, weighed on sentiments

• After a debacle in 2014, Brent prices headed further south to challenge 2008lows ($ 36) , extending the worst decline since 2008. To examine the largertrends going in to 2016, we looked at the long term charts which revealedsome interesting facts

• Current bear market in Brent since 2008 highs of $ 147 has witnessed thecorrection of 77% from it’s top value thereby marking equality with the1990-1998 bear phase which saw Oil prices correcting from $ 41 to $ 9.50over a period of eight years. We therefore believe that after a sharp declinein 2014, 2015, Brent prices may have already neared price wise correctionnear $ 31 which is a major technical support on following grounds:- Equality of current correction since 2008 highs with 1990-1998 fall @ $ 33- Breakout zone of 2004 in the range of $ 31-33

• Time wise, previous major fall lasted for eight years. With seven years ofcorrective phase already behind us, we may believe that Brent prices mayenter in to a consolidation phase for at least another year before meaningfulup move occurs.

• With well established down trend in Brent prices, we believe that thecurrent down trend is likely to persist over medium term . Upsides areexpected to be capped at $ 55 levels being 61.8% retracement of 2015decline (69-36)

• To sum it up, Brent prices are expected to remain under pressure goingforward and any pull backs are expected to be short lived

Brent ($37.39): Price damage nearing maturity, time correction likely...


Brent Generic futures Quarterly Bar chart

147

41

128

36

9.5

77% fall

Support @ 31•Equality with 1990-98 correction @ 33• Lower band of channel @ 32• Previous breakout zone @ 31

Strategy 2015: Stock Performance

Rec. Date Stock Recommended Rec Price Target Stoploss Exit Price % Profit/Loss Comment

Dec-14 GIC Housing 177.00 270.00 144.00 270.00 53.0 Target achieved

Dec-14 Asahi India glass 112.00 168.00 80.00 168.00 50.0 Target achieved

Dec-14 Nilkamal 462.00 660.00 375.00 660.00 43.0 Target achieved

Dec-14 Alstom India 568.00 770.00 455.00 760.00 36.0 Target achieved

Dec-14 BEL 2724.00 3650.00 2235.00 3650.00 34.0 Target achieved

Dec-14 Federal Mogul Gotze 376.00 520.00 295.00 490.00 33.0 Target almost achieved

Dec-14 BHEL 244.00 320.00 195.00 297.00 22.0 Book profit at 297.00

Dec-14 Ramco Cement 294.00 420.00 238.00 357.00 21.0 Booked profit at 357

Dec-14 Exide 165.00 235.00 135.00 173.00 5.0 Squre off at 173.00

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No 7, MIDCAndheri (East)Mumbai – 400 [email protected]

39

Disclaimer

ANALYST CERTIFICATION

We /I, Dharmesh Shah, Dipesh Dagha, Nitin Kunte, Pabitro Mukherjee, Vinayak Parmar Research Analysts, authors and the names subscribed tothis report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) orsecurities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) orview(s) in this report.Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited(ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution offinancial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its varioussubsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management,etc. (“associates”), the details in respect of which are available on www.icicibank.com.ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India.We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by ourInvestment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives frommaintaining a financial interest in the securities or derivatives of any companies that the analysts cover.The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report andinformation contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to,copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICISecurities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update orkeep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicableregulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or incertain other circumstances .This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has beenmade nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be usedor considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Thoughdisseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treatrecipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or arepresentation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinionsexpressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investmentobjectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment byany recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because ofchanges in interest rates, foreign exchange rates or any other reason.

40

Disclaimer

ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is notnecessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated beforeinvesting in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are notpredictions and may be subject to change without notice.ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have beenmandated by the subject company for any other assignment in the past twelve months.ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period precedingtwelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investmentbanking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchantbanking or brokerage services from the companies mentioned in the report in the past twelve months.ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICISecurities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party inconnection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict ofinterest at the time of publication of this report.It is confirmed that Dharmesh Shah, Dipesh Dagha, Nitin Kunte, Pabitro Mukherjee, Vinayak Parmar Research Analysts of this report have notreceived any compensation from the companies mentioned in the report in the preceding twelve months.Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned inthe report as of the last day of the month preceding the publication of the research report.Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownershipin various companies including the subject company/companies mentioned in this report.

Technical Outlook 2016 - ICICI Directcontent.icicidirect.com/mailimages/IDirect_Technical... ·...

Documents

Transcript of Technical Outlook 2016 - ICICI Directcontent.icicidirect.com/mailimages/IDirect_Technical... ·...