Stocks to buy or sell: Dharmesh Shah of ICICI Securities recommends buying L&T, Syngene International on November 25

Stock Market News: The domestic benchmark indices, Nifty 50 and Sensex, experienced a positive rally on Monday following the BJP-led government winning a majority in the recent state elections in Maharashtra.

The Nifty 50 index increased by over 1.45%, gaining 346.30 points to open at 24,253.55 points. Meanwhile, the Sensex index rose by 1,076 points, which is a 1.36% increase, opening at 80,193.47 points.

Experts have observed that the election results are influencing the markets today. If past trends hold true, the markets might experience a rally following the BJP's return in the Maharashtra state elections.

In the last trading session of the week (Friday, 22 November), Sensex and Nifty 50, recovered from earlier losses, buoyed by encouraging global cues. Strong indications from the US labor market and positive sentiment across various Asian markets contributed to this turnaround.

By the end of trading on Friday, the Nifty 50 closed at 23,907.25, gaining 557.35 points, while the Sensex finished at 79,117.11, up by 1,961.32 points. This significant recovery reflects optimism among investors amid broader market trends.

Vinod Nair, Head of Research at Geojit Financial Services, stated that the market recovered losses from earlier in the week on Friday, showing a strong bounce back as investors seized the opportunity to buy undervalued stocks. However, investors are seeking more clarity on the trend reversal before concluding that this bounce back will develop into a Santa Claus rally. Additionally, investors are dismissing concerns about Adani and hope that the upcoming state election results will bring greater stability to the market.

The results of the Maharashtra and Jharkhand elections will be key indicators for the markets. This is particularly true for Maharashtra, where the NDA achieved a decisive victory, which is expected to further strengthen bullish sentiment. However, global factors still present significant risks. The escalating tensions between Russia and Ukraine, along with rising crude oil prices, have heightened inflationary concerns. According to Santosh Meena, Head of Research at Swastika Investmart Ltd., the direction of Foreign Institutional Investor (FII) flows will be a crucial factor for the markets following the recent correction.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

Equity Benchmark staged a strong recovery and settled the truncated week on a positive note ahead of state election outcome. Nifty 50 gained 1.45% to conclude the volatile session at 23,907. The, weekly price action formed a bull candle with lower shadow, highlighting supportive efforts emerging from long-term rising trend line coincided with 52 weeks EMA, amid oversold territory. The Friday’s sharp up move helped index to recover intra-week losses and settled above immediate hurdle of 23,800.

Going ahead, we expect index to resolve higher and gradually head towards 24,500 mark in December underpinned by state election outcome that would boost the market sentiment. In the process, we expect Nifty 50 to hold the key support threshold of 23,200. Hence, accumulating stocks with strong earnings would be the prudent strategy to adopt in a staggered manner. Our constructive view is based on following observations:

a) Faster pace of retracement at 52 weeks EMA, indicates structural improvement in the short term as five sessions decline got retraced in just a single session.

b) Past five years December months seasonality favours bulls with 80% success rate wherein average returns have been to the tune of 3%.

c) The Index has a tendency to reverse the course of action on arrival of key Fibonacci number. Current correction has completed 8 weeks.

d) Breadth indicator (% of stocks above 50 days SMA in Nifty 500 Universe) has bounced from its bearish extremes of 12. Meanwhile, weekly stochastic recorded bullish crossover amid oversold conditions, indicating impending pullback.

Sectorally, we remain constructive on BFSI, IT, pharma while Infra, PSU offer bargain buy opportunity.

Structurally, since covid lows, average intermediate bull market corrections have been to the tune of 10% in Nifty 50 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 23,200-22,900 as it is confluence of:

a) 61.8% retracement of Jun-Sept rally (21,281-26,277), placed at 23,200.

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

c) 52 weeks EMA is placed at 23,146.

On the Bank Nifty front, index has bounced from the lower band of past six weeks consolidation 52,600-50,200 that coincided with 200 days EMA and long term rising trend line. The ratio chart of Bank Nifty/ Nifty 50 has been inching upward, indicating relative outperformance that makes us believe, index would eventually challenge the upper band of consolidation (placed at 52,600). Meanwhile, key support is placed at 49,300 as it is 52 weeks EMA coincided with 61.8% retracement of Jun-Sept rally (46,077-54,467).

Stocks To Buy This Week - Dharmesh Shah

1. Buy Larsen & Toubro (L&T) in the range of 3,550-3,615 for the target of 4,060 with a stop loss of 3,340.

2. Buy Syngene International in the range of 860-881 for the target of 980 with a stop loss of 819.

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 22/11/2024 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.