ITC and 13 other large and mid-cap stocks are in overbought zone. Find out more

by 5paisa Research Team Last Updated: Dec 12, 2022 - 12:07 pm 34.3k Views
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The Indian stock markets began the new year with a bang, only to sink a few weeks ago due to concerns of the impact of the war in Europe on fuel prices and other commodities besides the spectre of rate hikes.

But the markets are now back under the shadow of the bulls. The bounce-back has taken indices just 5% shy of the all-time peak level, touched in October last year.

Investors looking at charts and price and volume patterns have various parameters to decide whether a stock is ripe for the pick or is showing signals of weakness and is best left untouched.

We picked two measures--the Money Flow Index (MFI) and Relative Strength Index (RSI)--to check which stocks have entered the overbought zone under both parameters.

MFI is a technical oscillator that incorporates both 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 above 70 could be used as a measure to pick candidates that could see a slide in price soon. In contrast RSI is a conventional technical measure that uses only price.

We ran an exercise to see which stocks within the Nifty 500 pack are trading above the 70 mark across both RSI and MFI methodology. These stocks in effect could be in the overbought zone and may see a downtrend.

In total, there are some 14 companies that fit the bill. Of these, four are large caps with market valuation over Rs 20,000 crore and the rest are in the mid-cap space.

The large-cap stocks in this overbought zone are consumer goods major ITC, Tata Group’s retail arm Trent that runs Westside department chain among other formats, industrial gas producer Linde and Solar Industries.

The mid-cap stocks that figure in the list are Century Plyboards, Angel One, Gujarat Narmada Valley, Ratnamani Metals, Intellect Design, Bharat Dynamics, Supreme Petrochem, Polyplex, JK Paper and Uflex.

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