Check out the Nifty 500 stocks in overbought zone after market bounces back

by 5paisa Research Team Last Updated: Dec 11, 2022 - 02:46 pm 26.6k Views
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The Indian stock market has been consolidating after a heavy selloff followed by a bounce back last week. But there are many stocks that are potentially in the overbought zone given their positions on the technical charts.

We considered the Money Flow Index (MFI), which is technical oscillator that incorporates both the share price and traded volume data for placing companies in the overbought or oversold baskets. The index can also potentially help an investor to identify divergences that could be hinting at a change of trend in price.

The index figures vary between 0 and 100 and anything below 20 could be used as a measure to pick bounce back candidates and stocks with value over 80 are considered in the overbought space and therefore may see a selloff.

Since the MFI uses both price and traded volume data, it is also called volume-weighted Relative Strength Index (RSI) as against the conventional technical measure that uses only price.

Overall, we get 36 stocks in the Nifty 500 that could be up for a selloff.

Large-caps in overbought zone

Let’s first look at the large-cap space that includes companies a market valuation of over Rs 20,000 crore. In this segment, nearly a dozen stocks meet the mark. These are M&M, Bajaj Auto, Dr Reddy’s, Tata Elxsi, Balkrishna Industries, Zydus Lifesciences, Jubilant Foodworks, 3M India, Bayer Cropscience, Sumitomo Chemical, AIA Engineering and Timken India.

Mid-caps in overbought zone

In the mid-cap basket, there are nearly two dozen stocks that pass the filter. This segment includes stocks that command a market valuation of Rs 5,000-20,000 crore.

These include CreditAccess Grameen, Godrej Industries, Metro Brands, Fine Organic, Bharat Dynamics, Mangalore Refinery, Ratnamani Metals, Elgi Equipments, Cholamandalam Financial and City Union Bank.

Others in the zone are Godrej Agrovet, V-Guard, Aster DM Healthcare, RattanIndia, Gujarat Ambuja, AstraZeneca Pharma, Westlife Development, Home First Finance, PNC Infratech, Caplin Point and JK Lakshmi Cement.

Small-caps in overbought zone

Lower down, in the small-cap space, just three names are in the overbought zone that fit in with the oscillator range for the MFI. These are HEG, Shilpa Medicare and Indoco Remedies.

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