Stocks to Buy or Sell: ICICI Securities’ Dharmesh Shah Recommends Buying JSW Steel, NTPC Tomorrow

Equity Market News: Domestic benchmark indices Nifty 50 and Sensex posted gains during a special one-hour muhurat trading session on Friday, November 1, to mark the Diwali festival, with the gain mainly driven by auto stocks after encouraging monthly sales figures.

The Nifty 50 advanced 0.41% to 24,304.35, while the Sensex rose 0.42% to 79,724.12, breaking a two-day losing streak. U.S. stocks also rose as October nonfarm payrolls data raised expectations for additional interest rate cuts in the world’s largest economy.

Since last Diwali, the Nifty 50 has appreciated around 25% at the last close, supported by consistent policies, stable macroeconomic environment, positive business growth outlook and increasing retail investor participation. The broader market has also surged, surpassing benchmark gains, fueled by strong inflows into the country’s mutual funds and purchases from retail investors.

As Palka Arora Chopra, managing director of Master Capital Services, noted, the outlook for the market will be influenced by the results of the US presidential election, which will be announced on November 5, along with key macroeconomic data such as the HSBC India Manufacturing PMI (October 2012). ), HSBC India Services PMI (October), the US Federal Reserve interest rate decision, the US S&P Global Composite PMI (October), the US S&P Global Services PMI (October) and the Bank of England interest rate decision (November).

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

The equity benchmark witnessed a muted move in the run-up to the US elections and ended the truncated week on a flat note at 24,304, with the Nifty 50 swinging at a range of 360 points. As a result, the weekly price action formed a doji-like candle, locked within last week’s sizable bear candles, signaling a pause in downward momentum.

In the eventful week ahead, we expect volatility to remain high ahead of the US election and Fed outcome. However, tracking the maturity of the price correction amid oversold conditions and continued outperformance of Bank Nifty leads us to believe that the downside would be limited with the Nifty 50 finding its feet around the 23,700-23,500 zone.

Therefore, from a medium-term perspective, building up quality stocks in a staggered manner would be the sensible strategy. On the upside, a decisive close above the upper range of the recent consolidation (24,500-24,075) would result in an extended pullback towards the 24,900 points. In this process, stock-specific actions would continue as the earning season progressed. Our view on buying on dips is further confirmed by the following observations:

A) Since the heights of the corona crisis, the average interim corrections have been 8-10%. An 8% correction has already occurred, indicating a limited downtrend that bodes well for an impending pullback.

B) In the current phase of consolidation, Bank Nifty has been an outlier. The ratio chart of Bank Nifty/Nifty 50 shows a clear outperformance after bottoming at the lows of the cycle, which would provide impetus for a longer pullback in Nifty 50 as Bank Nifty carries a 32% weightage in Nifty 50.

C) The oversold condition of the weekly stochastic oscillator (placed at 10) coupled with the bearish extreme reading of the market breadth indicator warrants a pullback in the major indices as the percentage of stocks above the 50 day EMA has climbed from the bearish extreme of 12.

Structurally, we believe that strong support for the Nifty is placed in the range of 23,700-23,500 zones as it is a confluence of:

A) 50% retracement of the June-September rally (21,281-26,277), placed at 23,800.

B) Price parity of the election results falls 9%, forecast from the September high of 26,277.

C) 200 day EMA is placed at 23,500.

Sector-wise, we expect BFSI and pharma to continue their outperformance, while capital goods and infrastructure stocks offer a favorable risk-reward ratio, Shah said.

Stocks to Buy This Week – Dharmesh Shah

1. Buy JSW Steel in the range ₹940-968 for the target of ₹1,075 with a stop loss of ₹898.

2. Buy NTPC in the range of ₹402-412 for the target of ₹485 with a stop loss of ₹394.

Disclaimer: The research analyst or his family members or I-Sec do not have any actual/economic ownership of 1% or more securities of the relevant company at the end of 11-01-2024, or have no other financial interest and have no material conflict of interest.

The views and recommendations expressed in this analysis are those of individual analysts or brokerage firms, not Mint. We strongly advise investors to consult certified experts before making any investment decisions as market conditions can change rapidly and individual circumstances may vary.