July 11, 2015

Sector technical watch

A periodical report on key sectors

mentum stocks

BSE IT: - The sharp down trend in this sector has already been started and broken below the key supports. Hence, more
weakness is likely to come ahead.

BSE IT daily timeframe

BSE IT weekly timeframe

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Current Observation:

Daily Timeframe: The IT sector slipped into sharp decline during this week and lost by around 433 points, as per
week on week basis.

The larger triangle type pattern (brown converging trend lines) has been broken on the downside around 9985 levels
and the sector closed sharply below it.

Daily momentum oscillator like 14 period RSI has slipped below the key lower levels of 40 and reached the lows of
around 33 points. Currently, the daily RSI is moving within a bearish high low range of around 60-30/25 levels. This
is indicating the strength of downside momentum of the IT sector.

Among sector participants large cap stocks like TCS, Infy, Tech Mahindra, Wipro, Mind Tree and HCL tech are all
currently placed in a negative trend and it indicates more declines could be in store for near term. Other stocks like
Just Dial, OFSS, Naukri Cyient are also in a weak trend, but they are showing lesser weakness as compare to large
cap participants.

Weekly timeframe: The IT sector as per larger timeframe like weekly has witnessed a sharp decline this week, after
showing consolidation type moves in the previous few weeks.

The key lower levels support of ascending green trend line (around 10425 levels) have been broken sharply on the
downside and closed below it. The current support was holding in the last 5-6 months and its downside breakout
could be considered as break of an important support for the sector price.

Weekly DMI has widened from near the lower levels of 20, which is indicating that the strength of negative swing is
gaining its momentum.

The weekly ADX has been declining continuously and has reached the lows of around 17 levels. Normally ADX rising
from near the key lower levels lower levels of 15-16 levels could be considered as a beginning of a new trended
move in the sector. Indications of both ADX/DMI are signaling more weakness ahead of the sector.

Summing Up:

The sharp decline with the downside breakout of the key supports as per smaller and larger timeframe is suggesting
a weak bias for the sector for near term.

One may expect IT sector to decline further by next week down to 9850-9800 levels in the next 1-2 weeks. Hence,
one may continue to carry short positions in IT major and selective mid cap stocks for a reasonable returns for the
next 1-2 weeks.

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NSE Bank (Bank Nifty): The sector currently placed around the key overhead resistance. Upside breakout of it could
lead to further upmove and failure to sustain above the hurdle could possibly result in a beginning of downside
correction.

NSE Bank daily timeframe

NSE Bank weekly timeframe

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Current Observation:

Daily timeframe: The banking sector was slightly outperforming Nifty during this week, as the sector recovered
smartly from the lows, after slipping into sharp decline during this intraweek.

We observe a formation of positive sequence of higher tops and bottoms in Banking sector over the last few weeks.
Recently, the sector bounced back smartly from the higher low of around 18402 levels. Next upside resistance is now
placed around 19030 levels (brown horizontal trend line).

Major sector participants like Axis Bank, SBIN, HDFC Bank, ICICI Bank, Yes Bank, Kotak Bank, PNB, BOI, Federal
Bank are all now showing upmove, after the sideways consolidation. Other mid cap and PSU Banking stocks like
Canara Bank, IndusInd Bank, Syndicate Bank, Dena Bank, ALBK, KTK Bank, BOB are all showing positive trend as of
now.

Weekly Timeframe: We observe a sharp upmove in the banking sector in the last few weeks and currently the sector
is facing hurdles around 19000 levels.

We observe a horizontal type chart pattern in Banking sector as per weekly timeframe chart (green horizontal
parallel lines) and currently the sector has placed around the upper end of the pattern at 19000 levels.

Further sustainable upmove only above 19000 levels could continue with upside momentum and false upside
breakout could possibly lead to a beginning of down ward correction from the highs.

Summing Up:

The overall chart pattern of banking sector as per daily and weekly timeframe is still positive, but the sector has
placed at the edge of a strong overhead hurdle of the pattern around 19000 levels.

On the sustainable upside breakout of that resistance could lead the sector to the next upside levels of around 19550
levels. The false upside breakout or unable to move above that area could possibly result in a beginning of a
weakness as per weekly timeframe and that decline could revisit the lows of around 18000 levels.

One may adopt a strategy of going long position in Banking and PSU Banking stocks only on the sustainable upside
breakout of the banking sector above 19000 levels. On the failing of sector to sustain above the hurdle, one may
create short positions in Banking and also PSU Banking stocks for the next 1-2 weeks.

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Technical Research Analyst: Nagaraj Shetti (nagarajs.shetti@hdfcsec.com)

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HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East),
Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com
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