AUTO INDEX after playing not so merry, merry-go-round between 6700 to 7200 levels is finally racing out of the range. It has crossed and closed above its 7200 levels which were acting as crucial resistance for the last six weeks.
In the initial half of the current financial year, it had witnessed a decline of around 2360 points from its recent high of 6059 levels. However, it took support around its previous support area of 6700-6800 levels which had worked perfectly in 2016. It has surpassed its falling supply trend line on a weekly scale and a possibility of bounce towards 8100 levels cannot be ruled out while the immediate support is intact at 6700 levels. Not only Auto stocks but some of the auto ancillary stocks are also witnessing strong buying interest namely: MARUTI in which we are expecting 7200 levels on immediate basis with support being intact at 5900 levels, HEROMOTOCO which has opened itself for 2900 levels after surpassing the resistance of 27000 levels with support being 2580 levels which also happens to be its 50 exponential moving average. Other stocks showing a similarly positive outlook is Minda Industries, Eicher Motors, Mothersumi.
Overall on a short term basis, the Auto index is showing some signs of bottom formation but however on medium to long term basis the structure still looks weak as it continues to make lower top lower bottom formation and is trading below its 50, 200 and 100 DMA.
Talking about banking on auto there are some Banking stocks which have supported the Index to bounce from their recent low of 10637 levels. Some of the Banking index heavyweights such as ICICIBANK, KOTAK BANK, SBIN, and HDFCBANK are showing strong buying interest and is all set to touch new higher levels of recent times. For the index to continue with its positive momentum the Banks has to support.
Banking index overall has taken support around its 26400 levels and which has been working perfectly for the last 9 months and continue to remain the support levels. It is all set to head towards 28500 levels which is the 50% retracement of the overall price movement from 31660 to 26560 levels. Overall the structure is still negative as it has been making lower top lower bottom formation thus until and unless it moves above 28500 levels the medium-term view continues to remain negative.
Thus, you can definitely bank on Auto BUT as we all know to invest in the stock market is subject to risk read the offer document properly before investing although in this case, it can be re-quoted as “Investing in the market is subject to risk maintain your discipline and follow the levels perfectly to gain from the same”.
Author: Miss.Ayushi Bagri, AnandRathi Equity Research, 13th September 2019