Over the past weeks, the equity markets have been under turmoil. During the whole of November, we have seen unabated FII selling. Except for two days this month, the FIIs have been net sellers in the Indian market. As of now, November has seen net FII selling to the tune of over Rs. 29800 crores. We have witnessed Nifty staging a smart technical rebound after a brief violation of the 200-DMA. However, what was seen over the past week was a painful mean reversion of the markets. At one point, Nifty traded more than 10% of its 50-week MA. Following the recent corrective decline, the index tested the 50-week MA, which is currently at 23369, and hopefully, it will complete the mean reversion process.

Amid this turbulent corrective period, the Nifty IT Index has been resilient and relatively outperformed the broader markets. The Nifty IT index tested its fresh high this week and substantially improved its relative momentum against the broader markets. The +DI staying above the -DI and the ADX remaining above 20 represents strength in the current uptrend. The Relative Strength analysis also shows that the IT Index has reversed its long-term trajectory of relative underperformance. The RS line has reversed its long-term trajectory and is now moving higher.

Many of the IT Index components are showing strength and exhibiting the potential to generate a decent alpha against the broader markets over the coming weeks. LTTS is one such stock.

The stock formed its peak near Rs. 5762 in January 2022. Since then, the stock has been trading in a very wide range. Until today, LTTS has seen trends and counter-trend moves and found support below or at its 100-week MA. The period from January 2022 until now has seen the level of Rs. 5760 getting tested over three times. This entire price action has formed a large ascending triangle on the weekly chart.

The Ascending Triangle is an essentially bullish formation. They are known for getting resolved with the price eventually breaking out on the upside regardless of their place of formation. Going by this, the LTTS is developing a major long-term bullish pattern.

Currently, the stock trades above all key crucial moving averages. The RSI has formed a new 14-period high, which is bullish. The weekly MACD is on the cusp of a positive crossover, as evidenced by a sharply narrowing Histogram.

For investors seeking entry, the recommended buy range lies between ₹6700 and ₹6800, with a price target of around ₹8100, offering an anticipated upside of approximately 19%. To manage risk, a stop-loss can be maintained at ₹6470. In conclusion, this NBFC stock’s consolidation within a strong technical pattern, along with key support indicators and bullish signals on multiple charts, suggests a compelling buying opportunity for those looking to capitalize on the current market conditions.

LTTS stays inside the leading quadrant of the RRG. The RS line against the broader Nifty 500 index has flattened and now looks at moving higher. This is likely to ensure continued relative outperformance of the stock.

The stock has strong potential to retest Rs. 5800 level over the coming weeks. This would mean an appreciation of over 9% from its current levels.

At this stage, it is important to note that even if these expected levels are tested, LTTS would still be inside the Ascending Triangle and readying itself for a major breakout. This hints at the potential alpha that the stock can achieve over the coming months. The current technical setup makes LTTS an excellent medium to long-term inclusion in the portfolio.

-Foram Chheda, CMT