Muhurat Trading Strategy: Expect range-bound session, says Rupak De;ITC, HDFC Bank, among five stocks to buy this Diwali

Muhurat Trading is a unique and symbolic trading event that takes place during Diwali, signifying the beginning of the Hindu New Year. This quick, one-hour session occurs in the evening and is thought to attract wealth, prosperity, and good luck for investors and traders. Given that the trading hours on Muhurat Trading day are quite limited and occur outside regular trading times, Rupak De from LKP Securities anticipates a session that remains range-bound without any major directional shifts.

Rupak De pointed out that Samvat 2081 presents a stark contrast to the prior two years, during which investors and traders swiftly earned profits. The stocks, particularly in Public Sector Undertakings (PSUs), saw substantial growth. Nevertheless, this year in Samvat 2081, De recommends redirecting attention from midcap PSUs to large-cap stocks. It is essential to be highly selective in stock selection this year.

De notes that Diwali 2024 poses a challenge, making it difficult to choose a solid stock. Here are several key points to consider: First, the emphasis should be on reputable companies with robust earnings and impressive technical chart performance. Additionally, midcaps, small caps, and public sector units have experienced significant corrections, but they might not recover as swiftly as we saw in the previous two years. Finally, prioritizing risk management should be essential for both traders and investors.

Technical View for Samvat 2081 by Rupak De, Senior Technical Analyst, LKP Securities

Technically, the Nifty 50 has formed a head-and-shoulders pattern breakdown, suggesting a bearish reversal for the short to medium term. The breakdown below the neckline at 24,700 triggered a sharp sell-off, as major players sided with the bears upon the breakdown of this significant pattern. Additionally, Nifty fell below the 38.2% Fibonacci retracement level (24,375), which served as an early warning of a bearish reversal.

Moreover, the index has dropped below the 100-day moving average (DMA), increasing the likelihood of a decline toward the 200-DMA. The 200-DMA is a crucial long-term indicator, and a decisive fall below this level would signal long-term weakness in the Indian market. The head-and-shoulders pattern breakdown indicates a price target of 23,200, so we expect the index could decline toward 23,300-23,200 in the short term.

In layman’s terms, the Nifty 50 and the broader Indian market appeared overbought a few weeks ago. Negative factors, including high valuations of Indian stocks, Chinese stimulus measures, and geopolitical tensions, led to selling pressure. During the first leg of correction, the index fell about 5.8%, followed by a consolidation phase. The second leg of the correction began as buyers were overwhelmed by sellers, pushing the total correction to around 8.3% and still counting.

The sentiment remains very weak, with fragile support at 24,000. A break below this level could drive the index down toward 23,200. From 23,200, we anticipate a smart recovery in Nifty 50, potentially rebounding to higher levels, at least towards 24,600-24,900. However, pain might persist for several months if Nifty 50 falls below 23,000.

Stock Recommendations - Five stocks to buy this Diwali 2024

Buy Bajaj Finserv Ltd at ₹1,660-1,720; Target Price at ₹2,250; Stop Loss at ₹1,400

The stock gave a symmetrical pattern breakout on a larger timeframe, indicating a strong uptrend for the medium term. Recently, it experienced a decent pullback, leading to a retest of the pattern breakout. In the short term, the stock could move toward ₹2,250.

Based on the technical setup, we expect a decent rally in the stock price over the next 9-12 months. On the lower end, support is seen at ₹1,400, below which the stock might show signs of weakness.

Buy ITC Ltd at ₹460-490; Target Price at ₹630; Stop Loss at ₹430

The stock has formed a flag pattern breakout on the monthly chart, signalling a continuation of its upward trend. During a corrective phase, it found support near the 50-week EMA and further support at the 200-day EMA, reinforcing bullish momentum.

These technical indicators and chart pattern suggest the trend is likely to persist. Investors can consider buying the stock in the range of ₹470-490, with a stop loss at ₹430. The projected targets are ₹630, achievable over a one-year time frame.

Buy HDFC Bank Ltdat ₹1,700-1,750; Stop Loss at ₹1,596; Target Price at ₹2,200

The stock shows a bullish setup across multiple time frames, from daily to monthly. On the daily chart, a bearish pattern failure signals a bullish reversal. Additionally, an ascending triangle pattern breakout on the weekly chart, suggests a rise in bullish bet in the stock. The RSI forming higher lows indicates strengthening momentum. These technical signals collectively point towards sustained bullish momentum, recommending a buy-on-dip approach to capitalize on potential gains.

Buy Mphasis Ltd at ₹2,950-3,050; Target Price at ₹4,000; Stop Loss at ₹2,584

The stock has been consolidating following a swing high breakout on the weekly chart, suggesting a pause before the next rally. Additionally, it has maintained a higher-top, higher-bottom formation on the weekly timeframe and continues to trade comfortably above the 200-week Simple Moving Average. Based on the technical setup, we expect a significant rally in the stock price toward ₹4,000 over the next 9-12 months. On the lower end, support is seen at ₹2,584, below which the stock might show signs of weakness.

Buy Thermax Ltd at ₹5,370-5,430; Target Price at ₹6,400; Stop Loss at ₹4,850

The stock is displaying a strong trend, characterized by higher highs and higher lows. During its correction phase, it found support near the 50% retracement level of its previous rally from ₹2,500 to 5,840. Besides, it found support around 50-Weeks EMA, suggesting the trend’s continuation post-correction. Additionally, the RSI is in a bullish crossover, indicating strong momentum. Investors can consider buying the stock within the range of ₹5,370-5,430 for a long-term horizon of one year. A stop-loss at ₹4,850 is recommended, with a target price of ₹6400, aligning with the stock’s bullish trajectory.

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.