Blue Star, Dollar Industries among stocks in oversold zone

The Indian stock market has been trying to slowly claw back after the sharp slide over the last two months that pulled it 15% below its recent peak. Even as the spectre of further interest rate hikes by the US Fed and the RBI is playing out in the mind of investors, the slide in the crude oil price despite the continuing Russia-Ukraine war has given some comfort to local manufacturers.

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 considered the Money Flow Index (MFI), which is technical oscillator that incorporates both 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. Anything below 20 could be used as a measure to pick bounce-back candidates. Stocks with a value over 80 are considered in the overbought space and therefore may see a selloff.

Since MFI uses both price and traded volume data, it is also called volume-weighted Relative Strength Index (RSI) as against the conventional technical measure that uses only price.

Mid-small caps in oversold zone

Most of the companies that could be ripe for a pick are in the small and micro-cap with just one stock from the mid-cap segment: air-conditioning systems maker Blue Star.

The only other company with a market cap above Rs 500 crore and oversold is innerwear maker Dollar Industries.

Looking a step lower down at companies with a market cap of over Rs 100 crore, there are 22 names. These include NBI Industrial Fin, Systematix Corp, Suyog Telematics, Parsvnath Developers, Asian Hotels (West), Vadilal Enterprises, KIFS Financial, Aakash Exploration, DRC Systems and Graviss Hospitality.

In the penny stocks pack, or stocks with price under Rs 50, we have names like Vinny Overseas, Suchitra Finance, Royale Manor Hotels, Nagreeka Exports, KHFM Hospitality, Eiko Lifesciences, Metal Coatings, Sarthak Industries, Shanti Overseas, Sainik Finance and ASL Industries.