Technical Outlook 2014 - Rakesh JhunjhunwalaExhibit 5: Comparative chart of BSE Sensex vs. BSE Mid cap and Small cap indices Source: Bloomberg, ICICIdirect.com Research • While the

Technical 2014

Technical 2014

StrategyStrategy

ICICI Securities Ltd. | Retail Equity Research

Rolling over bullish sentiment into 2014

Exhibit 1: BSE Sensex: expected course for Q1CY14

Source: Bloomberg, ICICIdirect.com, Research

Exhibit 2: BSE Sensex: expected course for Q2CY14

Source: Bloomberg, ICICIdirect.com, Research

Technical Strategy 2014December 24, 2013

• Bulls to power their way to 22000/6550 in Q1CY14 • Recent outperformance to continue in midcaps • Seasonality favours profit booking in Q1CY14 around 22000/6550

• A secondary corrective action within a primary uptrend to unfold in Q2CY14. Expect high volatility ahead of General Elections

• Long term investors remain patient. Start accumulating on declines to 18000-18500/5400-5500

Index to test 22000 in Q1CY14

Correction towards 18500-18000 in Q2CY14 to offer buying opportunity for long term

Domestic equity benchmarks are poised at an important crossroad near their lifetime highs. The question foremost on the minds of every equity investor is whether this is the beginning of a new bull market or is this just another bear market rally?

We believe the former is true. However, we feel this will not be a tearaway rally and investors will get good entry points in 2014. Our charts seem to indicate that a good buying opportunity is expected to emerge at ~18000-18500/5400-5500 levels in Q2CY14, which we strongly recommend to be bought into with an eye for 23000-24000/6900-7000 by 2015


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Exhibit 3: BSE Sensex: Expected course in second half of 2014

Source: Bloomberg, ICICIdirect.com Research

• From a secular perspective, the sizeable correction towards the 18000-18500 / 5400-5500 region in Q2CY14 should be used as a buying opportunity to ride the next major up-leg

• We expect the index to enter a sustainable uptrend in the second half of 2014 and head northwards towards 23000-24000 / 6900-7000 levels by 2015

• The outperformance of IT, pharma and FMCG will continue to astound but there may be some pauses among leaders, with sectoral rotation emerging

Index to enter a sustainable uptrend in second half of 2014 and head towards 23000-24000 by 2015

Our Top Picks for 2014

Scrip Name Target

TCS TCS 2100-2050 2500 1860

Tata Motors TELCO 365-350 440 315

Colgate* COLPAL 1295-1270 1580 1140

Cummins CUMIND 440-420 575 380

Ipca Labs* IPCLAB 704-680 890 595

JB Chemical* JBCHEM 124-116 170 97

Bosch* MICO 9600-9300 12350 8000

CMC* CMC 1510-1470 1940 1290

Kesoram Ind* KESIND 67-61 95 51

I-direct Code

Buying range

Stop loss

* Recommendations have been published on i-click to gain

Analyst Dharmesh Shah [email protected] Nitin Kunte, CMT [email protected] Dipesh Dagha [email protected] Pabitro Mukherjee [email protected]

Vinayak Parmar [email protected]


Page 3

Psychological barrier at historical highs…dash towards 22000 may turn out to be a fallacy Exhibit 4: BSE Sensex: - Weekly Line Chart


• After witnessing multifold gains during 2003-08, the Sensex remains in a multi year consolidation phase since 2008 till date

• During this consolidation phase, the index

revisited its historical peak of 2008 during 2010 and recently during December 2013. However, it failed to garner a sustainable follow through above the 2008 high

• Major bull market peaks are preceded by

extreme market frenzy and a broad sense of euphoria. As the marked tops out and does a U-turn, this euphoric sentiment is caught off-guard and investor sentiment is knocked down badly. Therefore, each subsequent revisit towards the major bull market peak invites a reaction and renders the benchmarks vulnerable to selling pressure at such peaks

• Therefore, we believe the rally towards

22000 / 6550 levels in Q1CY14 could turn out to be a fallacy as the leap to new high would be an ideal way to attract the last buyer

The rally towards 22000 levels in Q1CY14 could turn out to be a fallacy as the leap to new high would be an ideal way to attract the last buyer


Page 4

Benchmarks at new highs…but catching up exercise will flare up the mid/small caps in Q1CY14!!! Exhibit 5: Comparative chart of BSE Sensex vs. BSE Mid cap and Small cap indices


• While the benchmarks scaled new all-time highs during December 2013, broader markets have shown significant divergence

• The BSE Sensex has amazingly ticked the

peaks of 2008 and 2010 to make a new all time high (21483) in a volatile year. However, the BSE midcap and small cap indices are still languishing 37% and 56% below their respective 2008 highs

• Going forward, as the benchmarks flirt with

their lifetime highs, we believe broader markets will play catch up and participate in the remainder of this rally in Q1CY14. However, as a note of caution it is advisable to stick to quality names

While the benchmarks flirt with new highs, the catching up exercise will flare up the midcap/small cap space to play in Q1CY14. However as a note of caution it would be advisable to stick to quality names


Page 5

Seasonality to seep in, post Q1CY14 rally, as sizable correction in first quarter of every year a trending norm Exhibit 6: BSE Sensex Monthly Candlestick Chart


• A closer look at the historical evidence of domestic bourses reveals the Sensex has a seasonal tendency of topping out or at least witnessing a sizable correction in the first quarter of every year

• We have observed that in the last 14 years

the index has made a significant top on 12 occasions in the first quarter of every year

• Therefore, combining the strong

seasonality traits of our markets along with key technical resistances projected around the 22000/6550 zone suggests a strong possibility of the index pausing and entering a corrective phase in the first quarter of 2014

Historical evidence of over a decade suggests the index has a tendency of witnessing a sizable correction after topping out in the first quarter of every year


Page 6

Up 21% and basking at maturity of current up move as we approach 22000 levels!!! Exhibit 7: BSE Sensex Weekly Bar Chart


• Since May 2010, every major directional up leg on the index has measured about 25-30%. Further, it has been observed that post every 25-30% price rally the index has tended to entered a corrective phase

• Based on this tendency, the current up

move measuring an average 28% from August 2013 low of 17448/5118 is expected to lead the benchmarks towards 22000/6550 levels in Q1CY14

• However, as the index has encountered a

sizable correction after every 25-30% up-move in the last three years, it would be advisable to take profits off the table as the benchmarks approach the 22000/6550 zone in Q1CY14

Since mid 2010 every major directional up-move on index has measured an average 28%

Date Sensex rally Points Gained % Gain

25 May'10 - 05 Nov'10 15961 to 21108 5147 32%

20 Dec'11 - 22 Feb'12 15136 to 18523 3387 23%

04Jun'12 - 29 Jan'13 15749 to 20203 4454 28%

Average % gains 28%


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Resistance at upper band of long term rising channel coincides with our target of 22000 in Q1CY14 Exhibit 8: BSE Sensex Weekly Bar Chart


• The entire up move since December 2011 till date has been a well channelled affair as highlighted in the adjoining weekly chart of Sensex. The index has maintained a healthy uptrend by forming a series of rising peaks and troughs in this up-trending channel

• The index has respected the upper and

lower bands of this up-trending channel on multiple occasions in the last two years. Note that while all negative news flows have been well absorbed at the lower band of this channel, in the same context most positives have also been priced in around the upper band of this channel

• The upper boundary of this long term rising

channel for the first quarter of 2014 is pegged around the 22000/6550 region. If the index approaches the upper band of this channel that would also result in the current up-move from 17448 nearing the 28% threshold in magnitude terms. Hence, it forms a strong basis for taking profits off the table upon such rise

Upper band of the key up-trending channel projects major resistance around 22000 levels in the first quarter of 2014


Page 8

Shrinking magnitude and lethargic pace of rallies since August 2013… early sign of fatigue? Exhibit 9: BSE Sensex Daily Candlestick Chart


• A closer examination of each directional leg of the rally since the August 2013 low reveals that the area of rallies is getting smaller in magnitude and also consuming more time as compared to previous legs

• Such behaviour within an uptrend indicates

that with each rally bulls are losing steam and have to toil hard to make their way higher

• Despite lack of any apparent reversal

signals at this point, the changing dynamics of the rally do exhibit early signs of fatigue setting in the markets

• Therefore, a cautious approach is

warranted on further upsides towards the 22000 / 6550 resistance area as the index would be more vulnerable to selling pressure at higher levels

August – September’13 rally 3290 points in 16 Sessions

October – November’13 rally 2056 points in 23 Sessions

November – December’13 rally measured just 1345 points in 12 Sessions

Rallies getting smaller and consuming more timeDate Sensex rally Points Gained Time Consumed

28 Aug'13 - 19 Sep'13 17449 to 20739 3290 16 days

01 Oct'13 - 03 Nov'13 19265 to 21321 2056 23 days

22 Nov'13 - 09 Dec'13 20138 to 21483 1345 12 days


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Keep it simple: Buy on declines (18000-18500) and ride the conviction (23000-24000)… Exhibit 10: BSE Sensex Weekly Bar Chart


• The entire up move since December 2011 has been a well channelled affair. The lower band of this long term rising channel for the second quarter of 2014 is pegged around the 18000-18500/5400-5500 region

• The long term 200 week simple moving

average (SMA) for the Sensex, Nifty is currently placed around 18375, 5530, respectively. As the index approaches the 200 week average it suggest a relatively cheap valuation compared to the price range of the past four years and, therefore, triggers value buying

• The major bullish gap area formed during

early September 2013 after the new RBI governor took charge and unleashed a slew of measures to shore up the rupee and reform the banking system is placed between 18847 & 18567 and 5552 & 5448 levels. This was the first major bullish gap, which acted as a sentiment changer after the correction during May-August 2013. Therefore, this will remain a stronghold of bulls

The confluence of the long term 200 week moving average (18375/5520), major bullish gap area (18847-18567/5552-5448) and the lower band of the key up-trending channel around the 18300/5500 region makes this a solid base for the markets

200 week SMA

Bullish gap area @ 18847-18567


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…As sustainable bull phase from second half of 2014 will lead index towards 23000-24000 by 2015 Exhibit 11: BSE Sensex Weekly Bar Chart


• We expect domestic equity benchmarks to form a major base around the 18500-18000-18500/5400-5500 region and rise towards 23000-24000/6900-7000 levels in the next major up-leg going into 2015 based on the following observations:

• The index is expected to replicate the

magnitude of its 2013 rally (17448 to expected Q1CY14 peak of 22300 = 4852 points) from its projected major base of 18500-18000/5400-5500, which gives a target price of 23000-24000/6900-7000. The tendency of each major up move since mid-2010 measuring an average 28% calculated from the potential base of 18500/5500 also projects upsides towards 24000/7000

• The value of the upper band of the major

rising channel, which encompasses the entire up move since 2011 for the first quarter of 2015 is also placed around 24000/7000 levels

The index tendency of each major up-leg measuring 28% & price equality with 2013 up move (17448 to estimated Q1CY14 peak of 22300) from the projected support zone of 18500-18000 projects upside target towards 23000-24000 that is expected to be achieved in 2015


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Buying on declines during Election Year rewards handsomely Exhibit 12: Sensex returns during election year in last three decades

Election Years

13%

64%

81%

-17%-1%

82%

17%8%

25%

-30%

0%

30%

60%

90%

1980 1984 1989 1991 1996 1998 1999 2004 2009

Source: BSE, ICICIdirect.com Research

• The year 2014 being an election year will have a significant bearing on sentiments in equity markets. It has been observed that the markets tend to give a thumbs-up to a stable government whereas they tend to get nervous in an unstable political scenario

• Our observation of market behaviour during

an election year indicates the index has done exceedingly well on seven out of nine occasions in the last three decades

• We expect volatility to shoot up in the run-

up towards general elections. However, based on historical evidence, we believe any price corrections towards the 18000-18500 / 5400-5500 support zone in Q2CY14 should be utilised as an entry opportunity


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Sectoral report card – 2013 Exhibit 13: Sectoral performance vis-à-vis Sensex for 2013


• Going through the performance of sectoral indices vis-à-vis the Sensex during last 12 months, it is no surprise to find that the IT space was the flag bearer in the 2013 rally, outperforming the benchmarks by a wide margin

• The defensive space also continued with

its outperformance during 2013. The healthcare and FMCG indices outpaced the benchmark by a healthy margin

• The auto space emerged as a market

performer • Underperformance was seen from the oil &

gas, capital goods, banking and metal space

Sectoral View for 2014

Indices Technical Rating

IT Outperform

Auto Outperform

Healtcare Outperform

FMCG Selectively Bullish

Banking Market Performer

Oil & Gas Range bound

Metal Consolidation on the cards

Capital Goods Selectively Bullish


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Technical Picks for 2014


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TCS (TCS) Buying range: 2100-2050 Target: 2500 Stoploss: 1860 Exhibit 14: TCS - Weekly Bar chart


• TCS has been a clear outperformer within the IT pack and a key flag bearer of the benchmark index over the past year

• The stock resumed its long term bull trend

after breaking out of its two year consolidation range (1050-1250) at the start of 2013. The two major rallies since October 2012, first till March 2013 and subsequently during June–October 2013 were retraced only by 38.2%, which indicates a strong uptrend

• From a medium-term perspective, we

expect the stock to find strong support in the price range of | 1850-1900 being 38.2% retracement of the previous up leg and lower band of the rising trend channel, which encompasses the entire price rally since early 2013

• We expect the stock to head towards the

target of | 2510 over the medium term. The price target is worked out based on Fibonacci ratios applied to magnitude of earlier rallies as projected from identical lows of November and December at 1970 (1970+542=2512)

• The underlying strength in the uptrend is

also supported by firm positioning of the 14-week RSI, which is trending up within the positive territory


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Tata Motors (TELCO) Buying range: 350-365 Target: 440 Stoploss: 315 Exhibit 15: Tata Motors - Monthly candlestick chart


• The share price of Tata Motors remains in a strong uptrend and has consistently outperformed its peers from the auto industry. The stock continues to work its way up and looks well geared for a further rally in 2014 post the breakout from the 15 month long consolidation (April 2012-September 2013) during September 2013

• A strong break out above multiple tops

around | 320 during September 2013 projects long term target towards | 440 being the width of the 15 month consolidation (320-200 =120) added to the breakout point

• During the entire 15 month consolidation

from April 2012 to September 2013, the stock respected its long term trend line during corrections, as shown on the adjacent price chart. The value of this trend line now coincides with the major breakout area of | 320, which is likely to act as a strong support for the stock over the medium term

• Among momentum indicators, the monthly

MACD (E-12/26/9) is seen trending up within the positive territory suggesting strong upward momentum

Consolidation break-out

Stock respecting long term trend line on Monthly time interval charts

MACD seen rising above its signal line supporting bullish momentum


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Colgate Palmolive (COLPAL) Buying range: 1295-1270 Target: 1580 Stoploss: 1140 Exhibit 16: Colgate Palmolive – Monthly bar chart


• After a stupendous rally during 2009-12 (300-1600), the stock price of Colgate took a breather during 2013. Therefore, it underperformed its peers, while maintaining the long term bullish price structure

• A key observation on the price charts has

been that the entire 12 month long consolidation has retraced the June 2011 – December 2012 rally (719-1580) only around 38% (1200)

• The share price is currently placed above

the key support around ~1150 being the lower boundary of the rising channel and value of 34-month moving average (1166), which has acted as strong support for the stock over the past 10 years

• After a 12 month consolidation, the stock

appears ripe for an up move in the upcoming year. We expect it to resume its outperformance during 2014 and rally towards its lifetime highs at 1580

34-month moving average

Stock is expected to resume its outperformance and rally towards life highs after year long consolidation above key support levels

Monthly RSI bouncing off its bull market support around 40 supporting long term bullish structure


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Cummins India (CUMIND) Buying range: 440-420 Target: 575 Stoploss: 380 Exhibit 17: Cummins India – Weekly Bar chart


• The long term price chart of Cummins Industries represents an established uptrend as exhibited by rising peaks and troughs

• The corrective decline during 2013 saw the

stock retrace its 2012 rally (| 322 to 537) by 80%. The slower pace of retracement signalled a healthy corrective action within a primary bull trend

• The ensuing bounce back towards late

November 2013 resulted in a break-out from the descending channel signalling an end of the corrective phase and resumption of the medium term uptrend

• We expect the current rally to lead the

stock price towards | 575, based on equality with the 2012 rally (322-537= 215 points) as projected from August 2012 lows of 369 (369+171=584). It also coincides with life high of the stock at 578

Break out from down trending channel suggest resumption of up trend Stock price is expected to out perform and rally towards its life high of 575 after a corrective decline during 2013


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Ipca Laboratories (IPCLAB) Buying range: 704-680 Target: 890 Stoploss: 595 Exhibit 18: Ipca Laboratories – Weekly Bar chart


• Ipca Laboratories remains in a secular bull trend & is one of the strong outperformers within the pharma space. Since 2011, each rally has been larger in magnitude while corrections have been shallow indicating a positive price structure

• Time wise, the stock follows a peculiar tendency of rallying for about 16 to 20 weeks whereas the subsequent consolidation phases also consumes similar time

• The entire up move since October 2011 has been a well channelled affair. The lower band of this rising channel along with 34 week EMA (645) has provided multiple entry opportunities during this uptrend. The recent corrective decline also saw the stock find support near the lower band of channel and 34 week EMA (| 641)

• The recent price activity indicates that the stock has concluded its corrective decline and appears set to embark upon its next up-leg. The target price based on equality of the current up leg from December 2013 low of 642 with the previous rally (260 points) projects upsides towards | 900 levels over the medium term

16-20 weeks of rally

34-week EMA

Each rally lasting for 16-20 weeks while corrections have been shallow and consumed almost equal time taken for rally Price projection towards 900 is based on magnitude of previous rally (440-408=268 points) as projected from December 2013 lows of 642

RSI bouncing off its bull market support around 40 supporting long term bullish structure


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JB Chemicals and Pharma (JBCHEM) Buying range: 124-116 Target: 170 Stoploss: 97 Exhibit 19: JB Chemicals and Pharma – Monthly Bar chart


• The share price of JB Chemicals broke out from a two year consolidation range (96 to 56) in the last quarter of 2013. Pictorially, this two year consolidation had taken the shape of a rounding bottom as highlighted on the adjoining charts

• The entire consolidation from September

2011 to November 2013 has panned out precisely above the 80% retracement (55) of the major rally from 2008 low of | 25.50 to November 2011 life high of 171

• While average monthly volumes during

consolidation were around 12 lakh shares, the October and November rally has attracted average volume of 34 lakh shares (three times six month average) validating the break out

• Post the break out from the two year

consolidation range, we expect the stock to rally towards its lifetime high ~171 levels in the coming year

• Key medium-term support for the stock is

placed around 2012 highs and November 2013 lows in the region of 98-95 levels

• Among momentum oscillators, the monthly

MACD (E-12/26/9) has entered the positive territory after flattening for several months indicating bullish momentum

Post break out from rounding consolidation range, stock price is expected to out perform and challenge its historical highs at 171 going forward

MACD rising above its signal line suggesting bullish trend for the stock from medium term perspective


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Bosch Ltd. (MICO) Buying range: 9600-9300 Target: 12350 Stoploss: 8000 Exhibit 20: Bosch – Weekly Bar chart


• Bosch, an auto component maker, has enjoyed a secular bull trend since its 2009 lows around | 2975. After a stupendous rally during 2009-12 (2975-9400) the stock went into hibernation mode to digest the strong gains. Bosch has consolidated in the broad range of 9400-8100 over the past 18 months from June 2012 – till date

• The recent price activity indicates the stock is breaking out of the 18 month odd consolidation (9400-8100) and appears set to resume its secular up trend during 2014 and rally towards 12350

• The target of 12350 is worked out based on the magnitude of the December 2011-April 2012 up leg (6450-9400 = 2950 points) as projected from the breakout point of the 18 month consolidation (9400+2950 = 12350)

• On the volume front, the December 2011-April 2012 rally was associated with soaring volumes (average 30,000 shares per week). The subsequent consolidation witnessed average 15,000 shares/week

• Among oscillators, the weekly MACD is resurfacing above its signal line suggesting the bullish momentum is returning to the stock and supports the overall positive price structure

Post 18 month consolidation stocks is expected to resume the rally towards 12350

Price projection is based on equality of previous up leg (6450-9400=2950) as measured from breakout level of consolidation @ 9400 providing target of 12350

Higher volumes during rally


Page 21

CMC Ltd. (CMC) Buying range: 1510-1470 Target: 1940 Stoploss: 1260 Exhibit 21: CMC – Monthly Bar chart


• The break out from the Cup and Handle formation, a continuation pattern, during December 2013 after 2011-13 consolidation signals resumption of the long term up trend

• The measuring implication of the price

pattern projects a price target towards | 1940 based on the depth of the cup (1370-800 = 570 points) as measured from breakout level of | 1370

• Structurally, the 22 month advance from

March 2009 to January 2011 got retraced by only 50% price wise while consuming 34 months. Such a slower pace of correction highlights the long term positive structure for the stock

• The key medium term support post the

recent break out remains at the identical November and December lows of | 1290

• The 14-month RSI is seen trending up

taking support at its own rising trend line connecting the swings of 2003-12 supporting the overall positive set-up

Break out from Cup and Handle continuation pattern reinforce long term bullish structure

34-month EMA

Multiple lows @ 800 being key 50% retracement support


Page 22

Kesoram Industries (KESIND) Buying range: 67-61 Target: 95 Stoploss: 51 Exhibit 22: Kesoram Industries – Quarterly Bar chart


• The share price of Kesoram Industries witnessed a dream run on the bourses during its major bull run from 2003-07 multiplying more than 25 times from a low of | 25 in 2003 to its lifetime high of | 670 in 2007

• One key observation based on historical price studies and market behaviour reveals that stocks have a tendency of bouncing back after losing their 90% valuation from their historical peaks. The rationale behind such price action is that valuations become extremely attractive at such levels for long term investors

• The price descent from an all-time peak of | 670 has seen the stock lose more than 90% of its value from the peak. After losing the bulk of the valuation the stock has witnessed a steady base formation over the last two quarters

• The price consolidation in the broad range of | 70-55 over the past two quarters has occurred precisely at the lower band of the long term channel in place since 1994

• We believe the stock is ripe for a pullback from the long term price supports. Therefore, it provides a good entry opportunity for medium term investment. We expect the stock to rally towards | 92 being the 38.2% retracement of the 2013 decline (160-50)

Stock retraced 90% from its top valuation and is placed at extremely attractive value support area We expect stock to attract value buyers and lead higher in 2014

Beginning of 2003 rally


Page 23

Exhibit 23: BSE IT Index - Monthly Candlestick chart


• The IT space has been abuzz with activity in the last year as most heavyweights from the sector scaled new all-time highs and the BSE IT index itself broke out above its previous high of January 2011 (6921) to close the year with a robust gain of more than 50%

• The major bull run during 2009-10 saw the

IT index gaining 4933 points (1988-6921) in 23 months. Thereafter, the index went into a consolidation mode from January 2011 till December 2012 and oscillated in a 2000 points range between 7000 and 5000. In the entire consolidation phase, the index retraced the 2009-10 rally by just 38.2% while consuming almost equivalent time taken for the rally. This signifies an established primary bullish trend

• The BSE IT index broke out past its all-time

high and the upper band of the two year consolidation range in July 2013 and gained from strength to strength thereafter

• The overall positive technical structure

suggests the index is likely to test 10735-11450 in the coming months being the price projection based on 123.6% and 138.2% extension of the major long term up move from 1988 to 6921 as projected from August 2011 low of 4639

The IT index registered a strong breakout from 2 year consolidation range of 7000-5000 on monthly time frame The index is likely to head towards 10735 & 11450 levels in the coming year


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Exhibit 24: BSE Healthcare Index - Monthly Candlestick chart


• The BSE Healthcare index remained in a secular bull trend since its March 2009 trough of | 2490. After a brief pause during 2011, the index embarked upon its next major rally since early 2012. Till date, it continues to make northward strides in a rising peaks and troughs fashion on the long term price charts

• The most important observation in the

charts of BSE Healthcare is that the index is steadily moving northwards in a well defined upward sloping channel since August 2011 as shown in the adjacent chart in blue

• We expect the Healthcare index to

maintain a positive bias in the coming year as well. The major support for the index is placed in the range of 9000 being the 12 months EMA, which is placed at 8950 and the lower band of the rising channel placed around 9000

• On the higher side, the index is likely to

head towards 10700-11100 in the medium term being the confluence of the upper band of the rising channel and 138.2% extension of the previous rally from 7719 to 9509 added to the recent higher bottom formed in August 2013 at 8339

BSE Healthcare index remains in secular bull trend forming higher peaks and higher trough and moving in a well structured upward rising channel which signals the index is likely to test 10700-11100 levels in coming month

BSE Healthcare index has support at 9000-9100 being the 12 months EMA and the lower band of the rising channel


Page 25

Exhibit 25: BSE FMCG Index - Monthly Candlestick chart


• The BSE FMCG Index remains in a secular uptrend since bottoming out in 2008 and till date it continues to form rising peaks and troughs on all time frames. The index has witnessed a multi-fold rally during October 2008- July 2013 rallying from 1550 to 7600

• After hitting an all-time high of 7600 in July 2013 the index entered a consolidation phase in the second half of 2013. For the last five months, it is seen consolidating between the broad range of 7100 and 5900. During the entire consolidation, the index has respected the 61.8% Fibonacci retracement (6356) of the previous major rally from 5570 to 7600

• Further, it has consumed almost equivalent time in the consolidation phase as the time taken for the preceding rally was also five months. Therefore, this sideways consolidation is seen as a temporary pause within a secular uptrend as bulls take a breather to gather steam for a further upward march

• The BSE FMCG index is likely to spend some more time in the above consolidation before breaking out of the above range of 7100-5900 and forming new highs. The index is likely to see stock specific activity as heavyweights after the recent strong run can spend some more time in consolidation while midcaps from the FMCG space can outperform

After an initial up move in the first half of 2013 the BSE FMCG index has consolidated for the rest of the year in the range of 7100-5900

BSE FMCG index has strong support in the range of 6200-5800 levels from long term trendline and lower band of the consolidation


Page 26

Exhibit 26: BSE Auto Index - Weekly Candlestick chart


• The BSE Auto index enjoys a healthy uptrend on the bourses as it has been steadily moving northwards in a well defined rising channel as can be seen in the adjacent chart. The lower boundary of this rising channel placed at 10700-10800 is likely to act as a major support in the index in the coming year

• The most important observation on the price activity during 2013 is that the BSE Auto index formed a bullish double bottom pattern around 9710. The pattern is made up of two distinct troughs that are roughly equal, with a moderate peak in between

• The index registered a strong breakout above its May 2013 peak (11512) during October 2013 and scaled a new all-time high. The breakout area of 11512 is likely to reverse and act as support in the short-term

• The bullish technical formation suggests the index is likely to continue its joy ride in 2014 as well and head towards a target of 13300-13500 in the medium-term. The measuring implication of the price pattern i.e. the width of the pattern (11512-9710=1802) added to the breakout level of 11512 gives a target of 13314 (11512+1802=13314). This also coincides with the higher band of the rising channel at 13500

Bullish Double bottom breakout in the weekly time frame of BSE Auto index signals higher side target of 13314

BSE Auto Index is moving in an up-trending channel forming a series of higher peaks and troughs

Weekly MACD in up trend forming higher highs on weekly chart


Page 27

Exhibit 27: BSE Capital Goods - Monthly Candlestick chart


• The capital goods space has made a strong comeback in the last four months of 2013 as most heavyweights form the sector shrugged off their underperformers tag and participated with renewed vigour in the September-December 2013 up move. The index has witnessed this renewed zeal after it retraced almost 90% of the March 2009-November 2010 rally (5394–16860) as shown on the adjacent chart

• The strong recovery in the last four months

has led to faster retracement of the last falling segment, which indicates a change of guard from a medium-term trend perspective. In the process, it has also registered a strong breakout above the overhead trend line formed by connecting the highs of November 2010 (16860) and December 2012 (11358)

• We expect the capital goods index to get

back into its old groove and perform with the markets. On the higher side, we expect it to test the 11800 and 13000 levels in the medium term being the 50% and 61.8% retracement of the major decline from 16860 to 6719

• The long term support for the index is

placed in the range of | 9100-8500, being the confluence of the recent breakout area (8700), the 200 day SMA (8950) and the bullish gap area of October 21, 2013 between 8428 and 8554

A long term trendline breakout signals a change of guard from a medium- term prospective and the index likely to test 11800 and 13000 levels in the coming months being the 50% and 61.8% retracement of the major decline from 16860 to 6719

Monthly 14 periods RSI taking support at its previous lows


Page 28

Exhibit 28: BSE Metals - Weekly Candlestick chart


• The metal space made a strong comeback in the second half of 2013, finally ending a prolonged phase of underperformance

• The ‘V’ shaped recovery led to faster

retracement of the last falling segment as the 13 week decline from May 2013 high of 9044 to August 2013 low of 6354 was completely retraced in just 11 weeks, thus signalling a change of guard from a medium-term trend perspective. In the process, the BSE Metal index has also pierced through its long term trend line resistance in place since January 2011

• After gaining more then 50% from August

lows (6354), the BSE Metal index is likely to consolidate the gains in the range of 8200-10000 before a fresh up move. A strong breakout above 10000 will see the index extend the current up leg towards 11500 in the medium term

• The medium term trend in the index

remains positive above 8200 being the confluence of the September 10, 2013 bullish gap up area of 8148-8210 and the recent breakout area of 8400, which is likely to reverse its role and act as support

• The long term weekly MACD is in a rising

mode and is currently sustaining above its trigger line signalling a medium-term bullish bias in the index

BSE Metal index has given a long term trendline breakout joining the highs of Jan’11 (18130) and Jan’13 (11510) which is currently placed at 8400 levels, which signals reversal of the long term down trend

BSE Metal index has given a “V” shaped recovery and a faster retracement of the last leg of the decline


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Exhibit 29: BSE Oil & Gas - Weekly Candlestick chart


• The BSE Oil & Gas index spent most of 2013 consolidating in the range of 8000-9200 from March 2013 till date

• The long term rising trend line connecting

January 2009 and June 2012 lows has been consistently lending support to the index during corrections highlighting the overall positive structure even as the short-term trend remains range bound

• After over 10 month consolidation (9200-

8000), we expect it to eventually breakout above 9200 during 2014 and rally towards 10400. The target of 10400 is worked out based on the magnitude of the previous consolidation (9200-8000 = 1200 points) as projected from the breakout point of 9200 odd levels (9200+1200 = 10400)

• The lower band of the 10 month

consolidation and the long term trend line since January 2009 lows placed in the range of 7900-8100 is likely to provide support in the corrective decline

BSE Oil & Gas index consolidated most part of 2013 in the range of 8000-9200. Index took support at the 61.8% retracement of the previous up move

Long term trendline support joining the lows of Jan’09 and Jun’12 in weekly time frame

MACD consolidating before the next up move in weekly chart


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Exhibit 30: BSE Bankex - Monthly Bar chart


• The BSE Bankex scaled its all-time peak of 15335 during May 2013 before reversing direction. The banking space was one of the major underperformers during the May-August period as the index wiped out the bulk of its 2012 gains. The PSU banking space has been the prime underperformer within the banking space

• A look at the long term monthly chart of

the index reveals the index is consolidating between the broad range of 15000 and 9000 levels since November 2010 till date. This 37 month broad consolidation after its stupendous rise during 2009-10 (3599-15108) is seen as a secondary correction within a primary uptrend

• Price wise the index has retraced the

2009-10 rally by just 50% while consuming almost twice the amount of time taken for the rally

• We expect the index to remain in the

consolidation range of 14500-10900 in the first half of 2014 as rallies are likely to face selling pressure near the upper band of the range. However, with a correction unfolding in the benchmark indices towards Q2CY14, declines towards the 10900-10000 area should be used as an entry opportunity for the long term

The index has retraced only 50% of its previous rally in almost twice the time periods suggesting bullish price structure

Monthly RSI taking support at its previous low

BSE Bankex during the consolidation has maintained higher high and higher low in the monthly time frame

37 Months consolidation

21 months rally


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Currency / Commodity Outlook 2014


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Exhibit 31: US$/INR - Monthly Bar chart


• The US$/INR pair behaved precisely in line with our expectations as detailed in the 2013 edition of this report. We had indicated that the US$/INR pair is expected to take support at the 53 mark and embark upon the next up leg towards 57-57.50 during 2013. The US$/INR pair bottomed out precisely near the earmarked support of 53 levels in the first quarter of 2013 as it made a low 52.97 towards February 2013 and witnessed a stupendous rise to a record high of 68.36 levels by August 2013

• After nearly 23% flight during 2013, the US

dollar is expected to remain under pressure on rallies. The US$ is currently placed near its short-term support around 60-61. In the short-term, the US$/INR pair may move towards 64-65 being the 61.8% retracement of decline from 68 to61 levels

• However, we expect the US dollar to

remain subject to selling pressure on such rallies and react lower towards 58 odd levels during 2014. The long term rising trend line connecting the yearly lows since 2011 is placed around 58 levels and, therefore, is seen as a very strong support for the US dollar

After hitting its life time low @ 68 odd levels during August’13 the rupee stabilised near 61-62 levels during last quarter

Going forward, Rupee may pull back in short term towards 64-65 levels, where it is expected to find strong support and lead towards 58 odd levels during 2014


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Exhibit 32: Gold international. - Monthly bar chart


• During mid-2013, gold prices breached the lower band of their 20 month trading range of $1800-1550 led by a host of reasons like confidence returning to the recovery of the US economy, a stronger US dollar and panic created by negative news flow of countries like Cyprus selling their gold reserves to fund sovereign debt

• Technically, the entire decline off

September 2011 highs of $1921 is seen as a correction of the 2008-11 rally (682-1921). The most significant observation has been that the 35 month rally (October 2008-September 2011) has been retraced by little less than 61.8% in the past 26 months. From a long term trend analysis, such a slower pace highlights a healthy corrective nature of the decline as usually trend reversals are characterised by faster retracements, which are absent in case of gold prices

• Therefore, going forward in 2014, we

expect gold prices to find support around $1150/ounce being the confluence of the long term rising trend ($1135) and 61.8% Fibonacci retracement of the 2008-11 rally placed at $1155. We expect gold prices to post a pullback towards the breakdown area of its 20 month long consolidation (September 2011-April 2013) at $1550

Key long term support is placed @ $ 1150 which is expected to attract buying support for Yellow Metal


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Exhibit 33: Brent Crude – Weekly Bar chart


• The most important observation on the long term chart of Brent crude is that after the 28 month rally from December 2008 lows ($ 36/barrel) to April 2011 highs ($127/barrel) Brent crude has been consolidating in a sideways manner for the past 33 months

• While the time wise correction has extended beyond 100% of the time taken for the rally, price wise it has retraced the 2008-11 rally only by 38.2%. The longer time consolidation and limited price correction (38.2%) indicate the corrective nature of the decline and highlight the overall positive price structure

• Another noteworthy observation is that during this consolidation each down leg has found support around the 200-week moving average, which is currently placed around $102

• The entire sideways action since 2011 is taking the shape of a contracting triangle. While only a break out from the consolidation would inject further momentum and directional bias, the overall positive price structure makes us believe Brent crude prices will rally towards their identical tops of April 2011 and March 2012 placed around $128. Therefore, declines towards $102 levels are likely to provide entry opportunities.

200-week EMA

The entire price consolidation over the last two years since 2012 is taking shape of a triangle pattern. Only a breakout from this consolidation pattern would inject further directional bias


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Performance of Yearly Technical Picks 2013

Date Scrip Product ActionInitiation

Price TargetStop Loss % Gain /

(Loss) Remarks1-Jan-13 TV Today Cash Buy 75 120 56 60.00 Target achieved1-Jan-13 Pidilite Cash Buy 210 260 172 24.00 Target achieved1-Jan-13 AB Nuvo Cash Buy 1075 1295 878 20.00 Target almost achieved1-Jan-13 Nestle India Cash Buy 4800 5750 4400 20.00 Target achieved1-Jan-13 Sun TV Cash Buy 420 520 338 16.00 Booked at 4851-Jan-13 Tata Global Cash Buy 145 225 115 - Open1-Jan-13 Cipla Cash Buy 390 510 342 14.00 Booked at 4461-Jan-13 PNB Cash Buy 830 990 708 10.00 Booked at 9151-Jan-13 JK Tyre Cash Buy 110 155 88 (2.00) Exit at 1081-Jan-13 Ashok Leyland Cash Buy 24 34 20.5 (15.00) Stoploss Triggered1-Jan-13 BHEL Cash Buy 205 280 175 (17.00) Stoploss Triggered1-Jan-13 Mangalam Cement Cash Buy 165 230 135 (18.00) Stoploss Triggered1-Jan-13 NMDC Cash Buy 152 198 115 (24.00) Stoploss Triggered


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NOTES:

• It is recommended to enter in a staggered manner within the prescribed range provided in the report

• Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the report

• The recommendations are valid for three to six months and in case we intend to carry forward the position, it will be communicated through separate mail.

Trading Portfolio allocation

• It is recommended to spread out the trading corpus in a proportionate manner between the various technical research products

• Please avoid allocating the entire trading corpus to a single stock or a single product segment

• Within each product segment it is advisable to allocate equal amount to each recommendation

• For example: The ‘Daily Calls’ product carries 3 to 4 intraday recommendations. It is advisable to allocate equal

amount to each recommendation


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Recommended product wise trading portfolio allocation

Allocations Return Objective

Products Product wise allocation

Max allocation in 1 stock

Number of Calls Frontline Stocks Mid-cap stocks

Duration

Daily Calls 8% 2-3% 3-4 Stocks 0.50-1% 2-3% Intraday Short term Delivery 6% 3-5% 7-10 p.m 4-5% 7-10% Opportunity based Weekly Calls 8% 3-5% 1-2 Stocks 5-7% 7-10% 1 Week Weekly Technical 8% 3-5% 1-2 Stocks 5-7% 7-10% 1 Week Monthly Call 15% 5% 2-3 Stocks 7-10% 10-15% 1 Month Monthly Technical 15% 2-4% 5-8 Stocks 7-10% 10-15% 1 Month Techno Funda 15% 5-10% 1-2 Stocks 10% and above 15% and above 6 Months Technical Breakout 15% 5-10% 1-2 Stocks 10% and above 15% and above 3-6 Months Cash in Hand 10% - - - - -

100%


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Pankaj Pandey Head – Research [email protected] ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC Andheri (East) Mumbai – 400 093 [email protected] Disclaimer The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Ltd (I-Sec). The author may be holding a small number of shares/position in the above-referred companies as on date of release of this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of release of this report. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This report may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. I-Sec may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

Documents

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