Stocks to buy or sell: Dharmesh Shah of ICICI Securities recommends buying JSW Steel, NTPC tomorrow

Stock Market News: The domestic benchmark indices, Nifty 50 and Sensex, experienced gains during a special one-hour muhurat trading session on Friday, November 1, celebrating the Diwali festival, with the rise primarily driven by auto stocks following encouraging monthly sales figures.

The Nifty 50 advanced by 0.41% to 24,304.35, while the Sensex rose by 0.42% to 79,724.12, breaking a two-day losing streak. US stocks also climbed as the October non-farm payrolls raised expectations for additional interest rate reductions in the largest economy globally.

Since the last Diwali, the Nifty 50 has appreciated around 25% as of the last close, supported by consistent policies, a stable macroeconomic environment, a positive corporate growth outlook, and increasing participation from retail investors. The broader market has also surged, outpacing the benchmark’s gains, fuelled by strong inflows into the nation’s mutual funds and purchases from small investors.

As noted by Palka Arora Chopra, Director of Master Capital Services, the market’s outlook will be influenced by the results of the US Presidential Election, which will be announced on November 5, along with significant macroeconomic data such as the HSBC India Manufacturing PMI (October), HSBC India Services PMI (October), the US Federal Reserve’s interest rate decision, the US S&P Global Composite PMI (October), the US S&P Global Services PMI (October), and the Bank of England’s interest rate decision (November).

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

Equity benchmark witnessed lackluster movement ahead of US election and concluded truncated week on a flat note at 24,304 wherein Nifty 50 oscillated by 360 points range. As a result, weekly price action formed a doji like candle confined within last week’s sizable bear candle, indicating pause in downward momentum.

In the upcoming eventful week, we expect volatility to remain elevated ahead of US election and Fed outcome. However, tracking maturity of price wise correction amid oversold conditions and ongoing outperformance of Bank Nifty makes us believe that downside would be limited wherein Nifty 50 would find its feet around 23,700-23,500 zone.

Hence, accumulating quality stocks in a staggered manner from medium term perspective would be the prudent strategy to adopt. On the upside, a decisive close above upper band of recent consolidation (24,500-24,075) would result into extended pullback towards 24,900 mark. In the process, stock specific action would continue with progression of earning season. Our view of buying on dips is further validated by following observations:

A) Since covid lows, the average intermediate corrections have been to the tune of 8-10%. With 8% correction already in place, indicating limited downside that augurs well for impending pullback.

B) In current consolidation phase Bank Nifty has been outlier. The ratio chart of Bank Nifty/ Nifty 50 depicts clear outperformance after bottoming out at long term cycle lows that would provide impetus for extended pullback in Nifty 50 as Bank Nifty carries (32%) weightage in Nifty 50.

C) The oversold condition of weekly stochastic oscillator (placed at 10) coupled with bearish extreme reading of market breadth indicator warrant pullback in headline indices as % of stocks above 50 days EMA has bounced from bearish extreme of 12.

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

A) 50% retracement of Jun-Sept rally (21,281-26,277), placed at 23,800.

B) Price parity of election outcome decline of 9% projected from September high of 26,277.

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

Sectorally, we expect BFSI, pharma to continue with its outperformance while capital goods and infra stocks offer favourable risk-reward setup, Shah said.

Stocks To Buy This Week – Dharmesh Shah

1. Buy JSW Steel in the range of ₹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 relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 01/11/2024 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.