CLSA sees deeper selloff if Nifty breaks below 7,752; 4 stocks that are likely to outperform

NEW DELHI: A break below 7752 on Nifty is likely to trigger a massive selloff in the market, Laurence Balanco, CLSA's technical analyst, said in a report.

The 50-share Nifty index has shown its resilience compared to other regional markets, but even here, we have seen price action break threatening to go below key support at the 7,752-8,000, Balanco said.

"Such a move would negate the triangle consolidation scenario we had outlined in previous reviews suggesting a deeper selloff," he added.

Balanco is of the view that if Nifty slips below 7,752, the next chart support is at the 7,375 (38% retracement level of the 2013- 2015 advance) and then 6,800- 6,900 area where the 50% retracement level of the 2013- 2015 advance coincides with the 2014-2015 consolidation pattern.

Key support levels for Nifty are at levels - 7,752, 7,375, 6,800-6,900. Key resistance to watch out by traders are around - 8,000-8,045, 8,481- 8,561, 8,800-8,823 on the Nifty.

Stock that may outperform:

Fund managers consider companies with steady cash flow, strong profitability measured through consistent RoC, low price volatility measured through beta, consistent dividend-paying record, stable growth history relative to the rest of the market, said an ET report.

Historical evidence indicates that companies which fit these criteria outperform even in turbulent times. On Monday, foreign brokerage CLSA came out with a list of stocks that have the potential to show resilience in a falling market. These are HUL, Lupin, Asian Paints and TCS.



ET in a report quoting a CLSA report said that in the past five years, whenever the market fell 5-10%, chiefly due to global events, HUL, Lupin, Asian Paints and TCS have been preferred highly by fund managers who have been screening stocks based on capital preservation.

The companies also have an impeccable record of dividend-paying. For instance, in the past 20 years, paints major Asian Paints has missed only one year in paying dividend. The company maintained stable RoC of 36% during the global financial crisis of 2008-09.

Companies which emerged outperformers due to external shocks have been Hero MotoCorp, Exide, Cipla, Dabur India, Infosys, ITC, Engineers India and Hexaware Technologies.