Top Stock Recommendations: Dharmesh Shah of ICICI Securities suggests buying BEL, and LTIMindtree today

Stock Market News: As HCL Tech reported revenue growth in the June quarter and predicted sequential growth across verticals, the Nifty 50 surged to all-time highs on Monday, driven mostly by information technology firms.

The Sensex gained 0.25% to 80,723.86 points, barely shy of record high levels set on Friday, while the Nifty 50 increased by around 0.4% to a record high of 24,598 as of 9:19 IST.

Chief investment strategist Dr. V K Vijayakumar of Geojit Financial Services emphasised that the Indian market surge is still receiving backing from around the world. It's critical to realise that the US is driving this boom, with S&P 500 returns of 18.4% YTD compared to Nifty 50 returns of 12.7%. Latest inflation data in the US indicates a rate cut by the Fed in September.

The IT outcomes from TCS and HCL Tech point to better futures, which are now being discounted by the market. However, IT businesses' growth estimates are still modest, therefore it is doubtful that they would restart at their current rate of growth.

The market-leading Tata Consultancy Services' earnings indicated early indications of recovery in the industry, and on Friday, IT stocks joined an over-month-long record-breaking surge that sent the domestic benchmark indexes, the Sensex and Nifty 50, to record closing highs.

The Sensex gained 0.78% to close Friday's session at 80,519.34, while the Nifty 50 increased 0.77% to 24,502.15. This week saw a 0.7% increase, marking their sixth consecutive week of advances.

The market is experiencing a mix of excitement and fear, according to Vinod Nair, Head of Research at Geojit Financial Services, because of the dampened Q1FY25 profits prediction and the anticipation of a growth-oriented budget. However, the forecast of a robust GDP for FY25 stirred market confidence. The announcement of lower-than-expected US inflation to a one-year lowprovided new grounds for hope on the international scene. This has increased the likelihood of a US Federal Reserve rate drop in September to 90%, as seen by the decline in the dollar index.

As several firms, including industry giants Infosys and Reliance, are scheduled to disclose their Q1 results this week, Q1 earnings will be a major focus next week, according to Santosh Meena, Head of Research, Swastika Investmart Ltd. Furthermore, pre-budget talks are anticipated to increase market turbulence. Watchworthy global factors include the US Federal Reserve Chairman's speech, US retail sales data, and Japanese macroeconomic data. These events are probably going to have an impact on investor mood and market movements.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

• The index witnessed a rangebound activity and settled the week on a positive note tracking firm global cues. The weekly price action formed a small bull candle carrying higher high-low, indicating continuation of uptrend, albeit with a slowdown in momentum.

• The elongation of rallies followed by shallow retracement while sustaining above 10 days EMA highlights inherent strength that bodes well for gradual movement towards 24,800 in coming weeks. However, bouts of volatility amid overbought condition cannot be ruled out as weekly stochastic approached at 96 levels. Thus, temporary breather should not be considered as negative instead dips would offer incremental buying opportunity wherein immediate support is placed at 24,100. We expect focus to be on sectoral churns and stock specific action as Q1FY25 earnings season picks up from coming week. Our positive bias is corroborated with following observations:

• A) the faster pace of retracement helped IT index to resolve out of 10 quarters cup & handle pattern, following rate cut expectations in US. Given the significant weightage of IT sector in Nifty, this could act as a cushion going forward.

• B) strong domestic fund flow, firm global setups and Budget expectations along with monsoon progression domestically would be key factors influencing market direction.

• C) the sturdy market breadth bodes well for continuation of ongoing uptrend.

• On the broader market front, Nifty midcap, small cap indices have gained 22% and 28%, respectively which hauled weekly stochastic oscillator in overbought territory (placed at 96). Thus, we recommend to be choosy in this segment as retracement of rally cannot be ruled out and could lead to minor profit booking.

• Structurally, the formation of higher peak and trough supported by improving market breadth makes us revise support base upward at 24100 as it is confluence of:

• A) 38.2% retracement of past three weeks up moves 23,350-24,592.

• B) Last week’s low of 24,140 coincided with 20 days EMA.

On the Bank Nifty front, we expect index to consolidate in 53500-51700 range amid overbought condition of weekly stochastic oscillator.

Top Stock Recommendations

1. Buy Bharat Electronics Ltd (BEL) in the range of ₹325-335 for the target of ₹375 with a stop loss of ₹307.

2. Buy LTIMindtree Ltd in the range of ₹5,440-5,570 for the target of ₹6,100 with a stop loss of ₹5,124.

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 12/07/2024 or have no other financial interest and do not have any material conflict of interest.

The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.ea