Stocks to buy or sell: Dharmesh Shah of ICICI Securities recommends buying NTPC today

Stock Market News: Friday saw the Sensex and Nifty 50, the domestic benchmark indices, undergo their fifth consecutive session of decline, resulting in their worst week in over two years due to ongoing concerns about the escalating conflict in the Middle East. In addition, growing foreign outflows contributed to the negative sentiment among investors.

The Nifty 50 index experienced a 0.93% drop to 25,014.6, while the Sensex declined by 0.98% to 81,688.45 on that day. Over the week, both benchmarks recorded losses of about 4.5%, marking their most significant decline since June 2022, primarily driven by a 2% slump on Thursday.

The bearish sentimentpersisted because investors are keeping an eye on the growing tension in the Middle East and have implemented a sell-on recovery strategy, according to Vinod Nair, Head of Research at Geojit Financial Services. The rapid spike in crude prices might be limited by OPEC+'s increased output. With growing crude prices and money flowing to less expensive regions like China, market pessimism is predicted to persist in the near future.

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) meeting is scheduled to occur from October 7 to 9, 2024, and the market will be closely monitoring it. The results of the meeting will be announced on Wednesday, October 9. It is expected that the RBI will keep the benchmark repo rate unchanged at its current level during the upcoming policy review, as it has remained steady at 6.5% for the last nine consecutive meetings up to August 2024.

The second-quarter earnings season is commencing with major companies such as TCS, Tata Elxsi, DMart, and IREDA, among others, which will influence movements in specific stocks.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

Nifty 50 snapped three-week winning streak tracking escalating geopolitical worries and settled the week with a biggest cut since June-22 of 4.3% at 25,050 amid heavy sell off by FII’s. The index started the week on a negative note and accelerated downward momentum on the breach of last week’s low of 25800. As a result, weekly price action resulted into sizable bear candle, indicating corrective bias as contrary to our view, Nifty 50 breached key support of 25,800 and settled below it.

In the upcoming eventful week, we believe strong support for the Nifty 50 is placed at 24,800, holding above which would keep pullback options open amid oversold conditions (Daily stochastic oscillator is placed at 5). In the process, volatility to remain high while discounting development on ongoing geopolitical concerns coupled with RBI Policy and start of Q2FY25 earning season which would further dictate the trend. Only a decisive close below 24,800 would lead to extended correction towards 24,400.

Structurally, key point to highlight is that, in CY24, price wise index has not corrected for more than 5-6% while sustaining around its 50 days EMA and time wise such corrections have been arrested within 6-7 sessions and subsequently stage a decent up move. In current scenario, with 5% correction, index has approached 50 days EMA amid oversold conditions. Thereby, a decisive close above previous session’s high would be the first sign of pause in downward momentum that would open the door for pullback towards 25,500 in coming week.

Crude oil would be the key monitorable amid escalation of geopolitical worries. The current up move appears to be more of technical pullback from oversold territory. We expect, it to face stiff resistance in the 80-82 zone.

Sectorally, IT, Metal, Pharma are expected to relatively outperform while BFSI, capital goods, oil & gas offers bargain buy opportunity.

Stocks To Buy This Week - Dharmesh Shah

Buy NTPC in the range of ₹420-432 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 04/10/2024 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.