Technical Analysis

ITC hits multi-year low; IT sector bucks the trend

Yoganand D | Updated on February 01, 2020

BL Research Bureau


The Sensex and the Nifty started the session with a gap-down opening, taking cues from the bearish US markets which had plummeted sharply as coronavirus fears grow. The Dow Jones Industrial Average index had tumbled 2 per cent and S&P 500 index slumped 1.8 per cent in the last session.

The domestic equity benchmark indices recovered thereafter and began to hover in the positive territory while the Finance Minister was delivering Union Budget 2020. However, the Sensex and the Nifty turned bearish and began to witness selling as the Budget failed to cheer investors. The Sensex tested the psychological level of 40,000 and eventually breached this level decisively on the back of selling and profit booking. The Nifty which was testing the key support at 12,000 in the early part of the session, conclusively breached this base and extend the weekly fall.

Among the sectoral indices, the Nifty realty index was the biggest loser, nosediving 7.8 per cent, pulled down by DLF tumbling 12 per cent. The Nifty media and financial services indices declined 4.3 per cent and 3.9 per cent respectively. Only the Nifty IT index closed in the green, gaining 0.86 per cent, boosted by gains in TCS which jumped 4.2 per cent and Tech Mahindra advancing 1.3 per cent. The Nifty Next 50 index plummeted 3.4 per cent to 27,340 dragged by realty, insurance and housing finance stocks. The Nifty mid- and small-cap indices too fell by 3 per cent and 2.7 per cent respectively.

Nifty losers

Top Nifty losers are ITC, Tata Motors, HDFC, L&T and Zee Entertainment Enterprises, which plummeted in the range of 6-6.7 per cent. Underpinning the medium-term downtrend, the stock of ITC slumped 6.7 per cent to ₹219.2, breaking a significant long-term base at ₹240. The stock has recorded a multi-year low at ₹215.5. Technically, the near-term outlook is bearish for the stock. It is currently testing support at ₹220 and has the next crucial long-term support at ₹210. An emphatic downward break of these supports can drag the stock down to ₹200 over the medium term. Key resistances are at ₹230 and ₹240. A strong rally above ₹240 can witness a corrective rally to ₹250 and then to ₹260 in the same timeframe.

The stock of HDFC which used to be resilient, also dropped 6.3 per cent on Saturday, breaking below ₹2,300 levels. The near-term stance is bearish. A fall below the immediate support level of ₹2,250 can pull the stock down to ₹2,200 and then to the long-term base level of ₹2,050. Resistances are at ₹2,300 and ₹2,400. In the event of upward momentum, ₹2,450 and ₹2,500 could limit the upside.

Cheering the Nifty IT index, TCS jumped 4.3 per cent with good volume. Taking support at ₹2,063, it bounced back strongly and closed above the crucial level of ₹2,150. The rally could continue in the near term. A further rally above ₹2,200 could push the stock northwards to ₹2,250 and ₹2,300 levels. Supports are at ₹2,100 and ₹2,000.

Published on February 01, 2020

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