Stocks to buy or sell: Dharmesh Shah of ICICI Securities recommends buying PFC, PNB tomorrow – December 2

Stock Market News: On Friday, the last trading session of the week, the domestic benchmark indices, Nifty 50 and Sensex, showed positive movement, marking a step forward for the Indian stock market. Despite the volatility experienced over the past few weeks, which has been influenced by factors such as fund outflows, lower-than-expected Q2 earnings from some companies, and ongoing high inflation, there are signs of resilience.

The Sensex closed at 79,802.79 points, with an increase of 759.05 points, while the Nifty 50 closed at 24,131.10 points, up by 216.95 points. These gains reflect potential recovery opportunities for investors and the market as a whole, as per analysts.

According to Santosh Meena, Head of Research at Swastika Investmart Ltd, the markets are likely to react to the disappointing GDP growth of 5.4% reported on Monday. However, it seems that much of this slowdown has already been factored into market expectations. This weak data may push the Reserve Bank of India (RBI) to consider cutting interest rates sooner than anticipated. The upcoming RBI policy meeting on December 6 is expected to be pivotal, with both the decision on interest rates and the accompanying commentary drawing significant attention.

On the global front, geopolitical tensions, especially regarding the Russia-Ukraine situation, continue to pose risks. Nevertheless, the recent easing of the dollar index and US bond yields provides a more favorable environment for emerging markets, including India. Additionally, key macroeconomic indicators, such as the Manufacturing PMI for India, the US, and China, as well as US employment data and comments from US Fed Chair Jerome Powell, will greatly affect market sentiment moving forward.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

Equity benchmark extended gains over second consecutive week fueled by state election outcome that coupled with firm global cues. Nifty 50 gained 1% to settle the week at 24,131. Broader market remained outlier as Midcap, Smallcap gained 2.5% and 5%, respectively. The weekly price action resulted into small bear candle carrying higher high-low. The formation of lower shadow, indicates buying demand at elevated support base.

Going ahead, we expect Nifty 50 to form a higher base while holding the key support zone of 23,700-23,500, which would set the stage for challenging immediate hurdle of 24,500 and eventually head towards 25, 000 in the month of December. Hence, dips should be utilized to accumulate quality stocks in a staggered manner. Our constructive view is based on following observations:

a) Six weeks corrective phase in Bank Nifty got retraced back in just 2 weeks. Faster pace of retracement signifies structural improvement. Within the segment, PSU banks outperformed by gaining ~5%.

b) Past three decades historical data exhibit that December seasonality favour bulls with 73% success rate wherein average returns have been to the tune of 3%.

c) Significant improvement in market breadth data bodes well for extension of ongoing pullback as currently 36% stocks of Nifty 500 universe are trading above 50 days SMA compared to mid-Nov reading of 12%.

d) After facing stiff resistance from 108 levels US Dollar Index drifted below 106. Further decline would result into risk on sentiment in equities tracking its inverse correlation.

Sectorally, we remain positive on BFSI, IT, Pharma, Infra& Capital Goods while Oil & Gas, Metal offer bargain buy opportunity.

Structurally, since covid lows, average intermediate bull market corrections have been to the tune of 10% in Nifty and 9% in Bank Nifty. With 11% correction in Nifty 50 and 8% correction Bank Nifty is already in place, we expect index to maintain the same rhythm and stage a pullback in coming weeks while holding key support zone of 23,700-23,500 zone as it is confluence of:

a) 61.8% retracement of current rally (23,263-24,350), placed at 23,675

b) Long-term rising trend line that has been held over past 2 years

c) 200 days EMA is placed at 23,572

On the Bank Nifty front, the faster pace of retracement highlights structural improvement that makes us believe, index would form a higher base in the range of 51,500-52,000 zone and gradually head towards 53,500 in coming weeks as it is 80% retracement of past 2 months decline (54,467-49,787). The upward inching ratio chart of Bank Nifty/ Nifty 50 suggest continuation of relative outperformance going forward. Meanwhile, key support is placed at 50,400 as it is 80% retracement of current up move (49,787-52,760).

Stocks To Buy This Week – Dharmesh Shah

1. Buy Power Finance Corporation Ltd (PFC) in the range of ₹488-498 for the target of ₹562 with a stop loss of ₹459.

2. Buy Punjab National Bank (PNB) in the range of ₹102-105 for the target of ₹113 with a stop loss of ₹97.

Disclaimer: The Research Analyst or his relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 29/11/2024 or have no other financial interest and do not have any material conflict of interest.

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