SBI, Titan, Grasim among large-cap stocks in overbought zone

The Indian stock market has been consolidating for the past few weeks and is now just 3% shy of its all-time peak attained a year ago after a sharp bounce-back over the last one month. 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 hundreds of stocks but if we filter it down to Nifty 500, we get a pack of 76 companies. Of these, half are in the small and mid-cap space while the other half belongs to the large cap basket.

The situation was very different the last time we ran the same exercise when there were just a handful of large and mid-caps.

Large caps in overbought zone

If we look at the large-cap space with a market valuation of over Rs 20,000 crore, we have 37 stocks that meet the mark.

These include State Bank of India, Adani Enterprises, Titan, Adani Ports, Grasim, Vedanta, Siemens and Ambuja Cements.

Lower down the order, companies with a market cap of $5 billion or more and in the overbought zone include IndusInd Bank, HAL, SRF, Bajaj Holdings, Bharat Electronics, Bank of Baroda, Schaeffler India, ACC, IDBI Bank, Indian Hotels, PNB, Max Healthcare and Polycab.

Mid and small caps in overbought zone

Mid-cap companies commanding a market valuation of Rs 5,000-20,000 crore and in the overbought group include Apollo Tyres, Carborundum Universal, Elgi Equipments, J B Chemicals, Nuvoco Vistas, TTK Prestige, Tata Investment and Aditya Birla Sun Life.

Other mid-caps in the list are Ratnamani Metals, Lakshmi Machine, Brigade Enterprises, Bank of Maharashtra, CAMS, Allcargo Logistics, Laxmi Organic, Kalyan Jewellers, Vardhman Textiles, VIP Industries, Mazagon Dock, KRBL and India Cements.

The small-cap space within Nifty 500 had just five names in the overbought zone that fit in with the oscillator range for both MFI and RSI indexes: Rallis India, Gujarat Pipavav, Hikal, Vakrangee and Mahindra Logistics.