TCS, Bajaj Finserv, Nestle among stocks showing bearish signs with a ‘bald head’

The Indian stock market has been facing resistance that stops it from testing the previous all-time high. The benchmark indices, which were just around 2% short of the peak on Monday, have been seeing selling over the last three days.

The high retail inflation has evoked fears that the Indian monetary authority, Reserve Bank of India (RBI), would follow other global peers to go for a sharper than expected increase in policy rate when the committee meets on September 30.

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.

One such parameter is ‘black marubozu’, which means black bald head in Japanese. This is a one-day bearish pattern with a long black with little to no shadows. The pattern shows that sellers controlled the trading day from open to close. It signals a bearish pattern overall.

If we use this parameter and pick stocks from Nifty 500, we get as many as 27 companies. This is almost equally split between large and mid-caps, with just one small cap in the basket.

In the large cap space, there are names like TCS, Bajaj Finserv, Nestle India, HDFC Life Insurance, Hindalco Industries, GAIL (India), Tata Elxsi, YES Bank, Gland Pharma, Honeywell Automation and Fine Organic.

Just over half of the total are from the mid-cap space with a valuation in the Rs 5,000-20,000 crore bracket.

These include CreditAccess Grameen, Century Plyboards, J B Chemicals, Asahi India Glass, Nalco, IRB Infrastructure, City Union Bank, Route Mobile, Brightcom Group, Borosil Renewables, Network 18 Media, SIS, Edelweiss Financial, MMTC and V-Mart Retail.

The sole small cap stock in the list is Indiabulls Real Estate.