Stocks to buy or sell: Dharmesh Shah of ICICI Securities recommends buying Bank of Baroda, NALCO today

Stock Market News: The new trading week kicked off with gains in the domestic benchmark indices, with both Nifty 50 and Sensex posting strong gains on Monday.

Starting at 24,956.15 points, the Nifty 50 index saw a 0.41% increase of 102.10 points, while the BSE Sensex opened at 81,770.02 points, marking a surge of 545 points or 0.67%.

Analysts emphasized that this week's focus will be on the quarterly financial results announcements and the ongoing activity of foreign investors.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, mentioned that the Chinese stimulus and the low valuations of Chinese stocks have the potential to maintain the 'Sell India, Buy China' tactical trade for a while longer, offering an opportunity for medium to long-term investors. The continuous selling by foreign institutional investors (FIIs) has made financial valuations attractive in an otherwise overvalued market. Furthermore, the financial sector is performing well and is in good shape.

On Friday, the domestic benchmark indices, Sensex and Nifty 50, closed higher, recovering from the losses incurred during the opening session.

By the close of the trading day, the Nifty 50 had gained 104 points or 0.42%, ending at 24,854.05. The Sensex ended at 81,224.75, showing an increase of 218.14 points or 0.27%. Both indices saw a decrease of 0.44% and 0.19%, respectively, for the third consecutive week, which was attributed to disappointing corporate earnings and foreign investors exiting the Indian market.

Following the morning sell-off, Vinod Nair, Head of Research at Geojit Financial Services, noted that the market rebounded from the oversold level due to selective buying in financials, auto, and metals stocks. Positive initial results from private banks have created an expectation for optimistic upcoming financial results this weekend. The metals sector also showed strong performance, benefiting from a slightly better-than-expected growth in China’s Q3 GDP. Rate sensitive stocks were supported by consecutive rate cuts from the European Central Bank (ECB).

Market experts anticipate that crucial domestic and global economic indicators, such as India's Nikkei S&P Global Manufacturing PMI and Services PMI for October, as well as India's RBI MPC Meeting Minutes, along with US Initial Jobless Claims, Manufacturing PMI, Services PMI, and S&P Global Composite PMI for October, and UK Composite PMI for October, will play a significant role in determining the market's trajectory.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

The benchmark extended losses over third consecutive week despite positive global cues. Nifty 50 settled the week at 24,854, down 0.4%. Friday’s up move helped index to recover some of intraday-week losses and settled the week on a flat to negative note. As a result, weekly price action formed a small bear candle with shadows on either side, indicating extended consolidation amid stock specific action. Key point to highlight is that, Nifty 50 managed to hold the key support of 24,700 amid oversold conditions, indicating impending pullback on expected line

Going forward, we expect Nifty 50 to hold the key support threshold of 24,700 and challenge the upper band of consolidation placed at 25,200, that would eventually open the door for next leg of up move towards 25,500 in coming weeks

Structurally, current 7% correction has made the market more healthy as most of the Nifty 50 constituents have approached their key long term averages which offers favourable risk reward set up. In a bull market, 7-10% correction is a common phenomenon. Buying in such scenario have been fruitful from medium term perspective.

Hence, accumulating quality large caps would be the prudent strategy to adopt amid ongoing earning season. Our positive bias is further validated by following observations:

A. The ratio chart of Bank Nifty / Nifty 50 has resolved higher after forming base at long term cycle lows. As a result, Bank Nifty managed to hold last week’s low amid elevated volatility and eventually gained ~2% during the week, highlighting inherent strength. We believe, the revival in Banking stocks would provide impetus for pullback rally in Nifty 50 as Bank Nifty carries 32% weightage in Nifty 50

B. The breakout from 2 and half year’s consolidation in Russell 2000 index signifies broader participation that bodes well continuation of ongoing bull run on ahead of US election and further rate cut expectation

C. Crude oil price have dropped 5% after facing stiff resistance in 80-82 zone. In upcoming weeks, we expect it to consolidate in 72-80 range

Stocks To Buy This Week - Dharmesh Shah

1. Buy Bank of Baroda in the range of ₹243-248 for the target of ₹265 with a stop loss of ₹235.

2. Buy National Aluminium Company Ltd (NALCO) in the range of ₹226-232 target ₹248 stop loss ₹219.

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 18/10/2024 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.