These large and mid-cap stocks are now in the overbought zone

by 5paisa Research Team Last Updated: Dec 15, 2022 - 06:44 am 41k Views
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The Indian stock markets have begun the new year with a bang with a reversal of the recent correction that shaved off nearly a tenth of its value from its peak a couple of months ago. While the hawkish tone of the US Federal Reserve has led to the Indian indices giving up some of the gains, they are still close to their all-time highs.

Although many stocks have retained their investment flavour, some have now settled at a lower level while a few are sinking further as the liquidity overflow recedes.

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.

The MFI is a 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 zero and 100, and anything above 70 could be used as a measure to pick candidates that could see a slide in the price soon. In contrast, the RSI is a conventional technical measure that uses only the stock price.

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

In total, there are 18 companies that fit the bill. Of these, 11 are large caps with a market valuation over Rs 20,000 crore. The remaining seven are in the mid-cap space.

The large-cap stocks in this overbought zone include IT behemoths Tata Consultancy Services and HCL Technologies, Asian Paints, Eicher Motors, Tata Teleservices, Gujarat Fluorochemicals, Schaeffler India, CG Power & Industrial Solutions, KPR Mill, Aavas Financiers and Kajaria Ceramics.

The mid-cap stocks that figure in the list are Affle India, Anupam Rasayan, eClerx Services, Balrampur Chini Mills, GMM Pfaudler, Bharat Rasayan and Minda Corporation. 

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