Watch out for these large, mid-cap and small-cap stocks in overbought zone

by 5paisa Research Team Last Updated: 2022-06-08T17:12:27+05:30

The Indian stock market has been consolidating after a heavy selloff followed by a bounce-back last week. However, there are many stocks that are potentially in the overbought zone given their positions on the technical charts.

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 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, the RSI is a conventional technical measure that uses only the stock price.

We ran an exercise to see which stocks 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.

Overall, we get 178 stocks. Of these, barring five names, the entire set comprises small-cap stocks.

Large and mid-caps in overbought zone

If we look at the large-cap space with a market valuation of over Rs 20,000 crore, just four stocks meet the mark: Mahindra & Mahindra, Hindustan Aeronautics, Oil India and Mangalore Refinery.

The only company in the mid-cap set, commanding a market valuation of Rs 5,000-20,000 crore, is Chennai Petroleum.

Small caps in overbought zone

The small-cap space had over 170 names in the overbought zone that fit in with the oscillator range for both MFI and RSI indexes.

If we look at stocks with a market valuation of over Rs 1,000 crore we get Rolex Rings, Apar Industries, Elecon Engineering, Voltamp Transformers, Goodyear India, PG Electroplast, Wendt India, Banco Products, MPS, Lumax Industries and SMC Global Securities.

Lower down the charts, there are some three dozen stocks with market value between Rs 100 crore and Rs 1,000 crore.

These include Shankar Lal Rampal, Finkurve Financial, Sterling Tools, Raghav Productivity, Empyrean Cashews, Bhatia Communication, AGI Infra, Hindustan Motors, Chemcrux, Galactico, DHP India, Lesha Industries, Parshva Enterprises, Bheema Cements, Airan, Galaxy Bearings, Supreme Holdings, Mangalam Drugs, Prismx Global and Kohinoor Foods.

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