Nifty rise unsustainable: CLSA’s technical chief

CLSA’s chief global technical analyst Laurence Balanco said the risk of entering the market at this juncture is not favourable and one should book profits if the market shows further strength. He has advised switching from information technology stocks to banks.

“The Nifty’s advance is now showing parabolic characteristics, which are typically seen as a trend-ending signal as they are unsustainable. In addition, the daily momentum indicator is now at the same extremes seen at the January highs,” said Balanco in a note.

He sees the Nifty finding support in the 15,885- 16,132 range and resistance at 17,225 followed by 18,000. Meanwhile, the Bank Nifty index has broken out of its January-to-date consolidation pattern, which supports an upside target of 44,300-44,400.


The Nifty50 is up about 10% from August to 17,377.80 at close on Monday, while the Nifty IT index and the Bank Nifty are up 16.2% and 5.8%, respectively, during the same period. CLSA also highlighted stocks that are in favour:

RELIANCE INDUSTRIES
CMP: Rs 2,424.55
YTD Change: 22.16%

CLSA said RIL’s stock has been consolidating below the Rs 2,360- 2,375 resistance zone provided by the September 2020 and June highs after peaking in September 2020. “It would, however, take a break above Rs 2,360-2,375 to confirm the bullish implication of such a consolidation pattern. Such a move would support an upside target of Rs 3,130-3,140, some 37% upside,” said CLSA.

AXIS BANK
CMP: Rs 800.75
YTD Change: 29.08%

The contracting price swings since the February highs have formed the boundaries of a classic triangle pattern, said CLSA. “...close above Rs 764-778 resistance triggers the bullish implication of the cited triangle with such a move providing an upside target of Rs 964, some 23% upside,” said CLSA.

HDFC LIFE INSURANCE
CMP: Rs 735.65
YTD Change: 8.77%

Following the initial break above the 2019-2020 consolidation pattern, HDFC Life has been consolidating in a triangle pattern above this old resistance zone, which is acting as support at the Rs 646-655 area, said CLSA. This consolidation pattern sets up HDFC Life for the continuation of the original breakout with such a move supporting an initial upside target of Rs 820 and the 2019-2020 consolidation breakout supporting an ultimate upside target of Rs 1,050-1,100, the brokerage said.

ICICI LOMBARD GENERAL INSURANCE
CMP: Rs 1,561.90
YTD Change: 2.7%

A break above Rs 1,610-1,640 would trigger the bullish implication of the January-to-date consolidation pattern, said CLSA. Such a move would support an upside target of Rs 2,050-2,060, which implies a 29% upside, it said.