Stocks in focus: Ruchit Jain of 5paisa recommends ICICI Bank, and Asian Paints today

Stock Market News: Following a sharp recovery in Asian counterparts, the domestic benchmark indices, the Sensex and Nifty 50, saw a strong comeback in early trade on Tuesday following a harsh beating in the previous day.

In early trading, the Sensex increased by 1,092.68 points to 79,852.08. At 24,382.60, the Nifty 50 increased 327 points.

Asian markets saw a strong recovery as well; quotes in Seoul, Tokyo, Shanghai, and Hong Kong were noticeably higher. Japan's key stock index increased by more than 10%. Monday's US market close saw significant declines.

According to Dr. V K Vijayakumar, Chief Investment Strategist of Geojit Financial Services, unforeseen events and news might cause a market crash when market values are high. In the majority of asset classes worldwide, this is what transpired yesterday. The crisis was caused in part by tensions in the Middle East, fears of a US recession, and the unraveling of the Yen carry trade.

It is crucial to realise that India's correction was less than it was for most other markets. Once more, domestic investors saved the market as FIIs sold for ₹10,073 in the cash market, prompting DII purchases of ₹9,155 crores. However, the crash would have been more severe for the DII buyer.

Market Review and Outlook - Ruchit Jain

The negative global cues led to a significant gap down for Nifty 50 at the start of the week. The index corrected to make an intraday low below 23,900, but it managed to end the day above 24,000 with a loss of more than two and a half percent.

Our markets reacted sharply to the global equity markets sell-off seen on Friday evening. However, our markets had already indicated a probability of a short-term corrective phase during end of last week as the Nifty 50 had a negative divergence with the RSI, which we had highlighted in our earlier report.

India VIX, surprisingly rallied by 50 percent during the day to surpass the 20 mark, which indicates nervousness due to the uncertain global environment. The CBOE VIX (volatility index in the U.S.) also rallied sharply and such sharp up moves in VIX are not seen in normal dips within an uptrend.

Technically, Nifty 50 has now breached its 40-DEMA support and has formed a ‘Lower Low’ compared to the recent ‘Budget Day’ swing low of 24,074. Hence, the short-term trend looks negative and hence, we continue with our cautious approach on the markets and advise traders to stay on the sidelines and avoid bottom fishing till we see signs of reversal.

If the index breaks Monday’s low, then it can correct towards 23,630 in the near term. On the higher side, 24,350 and 24,500 will be seen as hurdles on the pullback move.

Stocks in focus today - Ruchit Jain

On stocks in focus on Tuesday, Ruchit Jain recommends ICICI Bank Ltd, and Asian Paints Ltd.

ICICI Bank Ltd (SELL)

The stock has recently seen a consolidation phase and had formed a Head and Shoulders Pattern. Prices have given a breakdown from the neckline of this pattern which is a bearish sign. Hence, we expect a short term correction in the stock. Traders can look to short ICICI Bank Aug Fut. in the range of ₹1,170-1,180 with a stoploss above 1,220. The potential near term target is seen at ₹1,100.

Asian Paints Ltd (BUY)

The stock has recently given a given a breakout from a consolidation phase with good volumes. The stock has already gone through a time wise as well as time wise corrective phase in last few months, and the price structure indicates possibility of a pullback move. Hence, traders can look to buy the stock in the range of ₹3,100-3,080 for potential target around ₹3,250.The stop loss on long positions should be placed below ₹3,020.

Disclaimer: 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 decision.