These large-cap stocks could be ‘buy’ candidates on Williams %R chart

The Indian stock market has been trying to bounce back from the lows after a sharp correction over the last month but faced another huge selloff on Thursday that took the indices back to around 15% below their peak.

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 picked a metric called Williams %R, which is a momentum indicator that can signal bullish or bearish trends for a stock.

Developed by Larry Williams, Williams %R is the inverse of the Fast Stochastic Oscillator. Its reading varies between 0 and -100, with 0 to -20 indicating an overbought range and -80 to -100 being seen as an oversold zone.

We ran an exercise to see which large-cap stocks are in the bullish zone as per Williams %R. In particular, we looked at stocks with market cap of over Rs 20,000 crore, with the William %R just crossing over -80 mark from the previous score at that level. We spotted around 24 such large caps which could be set for a trend reversal.

Broadly, this set is dominated by banking and financial services companies, followed by automobiles and auto components, and cement and construction stocks. Companies from other sectors include those from metals and mining, chemicals, hotels, utilities and general industrials.

Filtering them from the top end of their market cap with valuation of over $10 billion, we get names like State Bank of India, Bajaj Finance, Asian Paints, Larsen & Toubro, Bajaj Finserv, Tata Motors, HDFC Life Insurance, Hindustan Zinc and Grasim Industries.

Lower down the order, we have stocks such as Ambuja Cements, BPCL, Cholamandalam Invest, Hero MotoCorp, Balkrishna Industries, Piramal Enterprises, ACC, Ashok Leyland, PI Industries, Astral, Indian Hotels, CG Power, Indraprastha Gas, Aditya Birla Capital and APL Apollo Tubes.a