Maintain cautious approach for Muhurat trading, says Anand James of Geojit; DMart, HDFC Life among 8 Diwali stock picks

Muhurat Trading Strategy: Over the past decade, Nifty 50 has concluded positively in 8 out of 10 sessions of Muhurat trading. Additionally, for 80% of the previous 10 years, Nifty 50 experienced positive performance in the following two months. Foreign Institutional Investors (FIIs) were net sellers in 5 of the last 10 Octobers, but they were net buyers in November for 7 of those years, which contributes to an optimistic outlook for the upcoming two months.

However, prudence remains essential, highlighting the importance of careful stock selection. In 2022, the only year since 2020 when the 30 days leading up to Muhurat trading had negative returns, with Nifty 50 experiencing a decline of 1.18%, the subsequent 30 days saw an increase of 4.86%, according to Anand James, Chief Market Strategist at Geojit Financial Services.

Technical View for Samvat 2081 by Anand James, Chief Market Strategies, Geojit Financial Services

For now, the August low of 23894 appears to be a base that should encourage risk-takers to try and push Nifty 50 higher. We see 24,570 as the immediate challenge untila sell-on-rise approach is persistent, but it does stand a fair chance of being given away in due course. However, the favoured view sees all such moves only serving to complete the right shoulder of a head and shoulder reversal pattern that has formed since the start of the second half of this year. Unless we see a couple of weeks’ close above 25,100, expect the next leg of downsides to unfold, with the endpoint of the H&S moves seen at either 23,300-23,080 or 21,800.

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In Samvat 2081, with the expectations of a resurgence after a prolonged decline that began in late September 2024, Anand intends to adopt a measured strategy for selecting stocks. Therefore, he has classified his stock selections for Muhurat trading into two categories: Value Picks and Momentum Picks.

Geojit Financial Services identifies value picks as high-quality stocks that have dropped by at least 25% from their highest values in the past year or those nearing an upside breakout but are currently undergoing a consolidation phase. The risks of downside movements may be less compared to momentum stocks. Conversely, momentum picks are chosen based on the expectation of buying into strength.

These stocks have already experienced technical breakouts and are likely to see significant gains, but they also carry the risk of a prolonged waiting period if momentum slows down. This strategy generally outlines our approach for Samvat 2081, which will require more careful stock selection, unlike the more lenient conditions of Samvat 2080.

CarTrade Tech Ltd (Momentum Pick)

Technical set-up: Post the persistent declines since its IPO in 2021, the stock never went through a phase of a strong uptrend for the next two years until bottoming patterns matured in the second half of 2023, and a rise ensued. What started with an inverted H&S formation, a classic reversal pattern, the subsequent phase has shown at least two major bullish continuation patterns through a flag and a triangle in weekly charts. We are eyeing a continuation of momentum that could scale 61.8 and 78.6% fibo of the all-time high-low.

Risks: With the H&S and flag patterns’ targets having matured fully, there is a high reliance on the triangular pattern’s performance to achieve the targets fully. Downside markers may be placed either at the recent reaction low of 837 or near 780, the base of the triangle.

Piramal Pharma Ltd (Momentum Pick)

Technical set-up: The full maturity of a cup and handle pattern marked the completion of a reversal pattern and the beginning of a new uptrend. Incidentally, the consolidation that followed the cup & handle breakout lasted a few weeks but held above the neckline, confirming the uptrend. The significant rise in the first week of September put behind any concerns that the ascent would stall at the first sight of the listing price. The stock has just broken above the Fibonacci arc as well as a parallel consolidation phase that had lasted a few weeks, signalling a continuation of the uptrendaiming for the 1.618 Fibo arc target.

Risks: Oscillators are overbought in the weekly time frame, requiring ongoing upside momentum to maintain the bullish structure. The downside marker may be placed near or below 209.5, which is low compared to last week’s reaction.

Avenue Supermarts Ltd (DMart) (Value Pick)

Technical set-up: The stock has corrected over 27% from the 52-week high, passing through four consecutive days of decline. However, last week saw a positive close after horizontal support and 200 WSMA arrested declines. Weekly stochastics are at oversold levels, while the MACD histogram in the daily chart has been on a rising trend lately, pointing to a potential signal line crossover as well as a trend reversal. In such a scenario, we believe that the stock would retrace 38.2 to 78.6% fibo of the year’s high-low.

Risks: Reversal setups have yet to be confirmed, and the stock price's current trend amplifies the risks. Towards this end, we prefer to have our downside markers in the vicinity of 3% below the 200 WSMA of 3945 or near 3644, the next nearest reaction low.

Aptus Value Housing Finance India Ltd (Value Pick)

Technical set-up: A cup and handle pattern is in formation since its listing is now in its latter stage. Presently its handle is in formation and a breakout is long pending. A near 19% drop from the top has now found support at the 200 WSMA encouraging us to revisit the prospects of completion of the handle and a breakout thereafter.

Risks: The 400 region has resisted multiple upside attempts in the last two years, and the handle formation has taken an unusually long time, pointing to either an extended downside or a prolonged sideways move. The downside marker may be placed at either 333, the 200 WSMA, or near 300, the August low.

HDFC Life Insurance Company Ltd (Value Pick)

Technical set-up: The stock is presently in a consolidation stage after a failed attempt to breach the record peak seen in Aug 2021. We believe that this consolidation is part of a handle is in formation that could complete a cup and handle upside breakout.

Risks: MACD histogram has been slipping consistently lately and is now near zero line, pointing to a potential downside break of signal line. This should either mean that a short decline or an extended period of consolidation. Downside marker may be placed below 640, the 50 WSMA.

Five-Star Business Finance Ltd (Momentum Pick)

Technical Set-up: A cup & handle breakout has matured, potentially setting the path for powerful upsides. That this pattern’s low ended near the previous pattern’s crest is also suggestive of the bullish continuation nature of the present pattern, which is also evident from the series of bullish pennants, flags and triangles in the ascent from the August low.

Risks: The breakout past the neckline of the C&H pattern has failed to find further momentum in the succeeding week, which risks the breakout's failure. Though the nearest reaction low is 838, we prefer to keep the downside marker below 800, where support is offered by the super trend in daily periodicity.

Prism Johnson Ltd (Momentum Pick)

Technical Setup: A fully matured triangular pattern, the profit booking that ensued fully wiped off all the breakout gains. We aim to make use of this sudden decline, given that the cup and handle pattern that preceded the triangle projects a larger up move.

Risks: The quickness of the decline from the top has the potential to evolve into a stronger downside, invalidating both the triangle and the C&H pattern. For now, the declines appear to have found support from the base of the triangle. The downside marker may be placed below 155 at the end of the secondwave of the ongoing uptrend or below 142 near the neckline of the C&H pattern.

Sanghvi Movers Ltd (Value Pick)

Technical Setup: Having corrected almost 51% from the top, a corrective move is now in play, having bounced off the horizontal support of 370. Further, MACD is poised for a signal line crossover from below, supporting our expectations for a reversal.

Risks: The stock is presently on a downside trend line channel, with a series of downside continuation patterns. Even the relief rally has fizzled out, and we are at 78.6% of the recent low-high. Another downside attempt cannot be ruled out, and hence a downside marker may be placed near 343, the 61.8 fibo of the 2021-2024 low high.

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.