Stock to buy or sell: Dharmesh Shah of ICICI Securities recommends buying Syngene International today

Stock Market News: The domestic benchmark indices, Sensex and Nifty 50, kicked off the new week with slight increases after both experienced a decline of about 2.5% last week.

The Nifty 50 index opened at 24,251.10 points, reflecting an increase of 70.30 points or 0.29%, whereas the Sensex index began at 79,653.67 points, indicating a rise of 251.38 points or 0.32%.

Experts have noted that market volatility is expected to increase as the selling pressure from foreign institutional investors continues to affect Indian markets.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that during the recent market correction, a notable trend has been the shift towards quality investments. While the Nifty 50 dropped by 8.3% from its recent high, the mid and small cap indices saw corrections of 9.8% and 9.3%, respectively, from their peaks.

The global market outlook could improve following the restrained Israeli strikes against Iran, which have spared the Iranian oil fields and led to a significant decrease in crude oil prices. The upcoming US presidential elections, along with the uncertainty they bring, will likely continue to pressure the markets.

On Friday, the domestic benchmark indices, Nifty 50 and Sensex, marked their longest weekly decline since August 2023, exacerbating a widespread selloff as foreign investors continued to withdraw and disappointing corporate earnings dampened sentiment further.

The Sensex plummeted by 662.87 points, closing at 79,402.29, while the Nifty 50 declined 218.60 points, finishing at 24,180.80.

The Nifty 50 was considered overbought on September 27 when it reached record highs. Since then, the index has decreased by 8%, impacted by foreign sell-offs over the last 19 sessions, as investors shift their funds to China in response to Beijing's stimulus initiatives and relatively lower valuations.

Vinod Nair, Head of Research at Geojit Financial Services, noted that the domestic market experienced a steady decline due to ongoing selling by foreign institutional investors (FIIs). All sectors were affected, with small and midcap stocks bearing the brunt of the impact, except for fast-moving consumer goods (FMCG). Nevertheless, domestic institutional investors (DIIs) have been actively purchasing shares, which helped absorb the selling pressure and reduced the downturn. As a result of this continuous selling trend, the domestic market is anticipated to enter oversold conditions.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

Equity Benchmark extended losses over fourth consecutive week tracking lackluster earnings coupled with relentless FII's sell-off. Nifty 50 settled the week at 24,180, down 2.4%. The broader market bore the brunt of market sell-off as a result, Midcap and smallcap index plunged ~6%. The weekly price action resulted into sizable bear candle, indicating extended correction.

The Nifty 50 drifted downward on the breach of key support of 24,400. The formation of lower high-low signifies continuation of corrective bias wherein strong support is placed at 23,700-23,500 zone. In the process, stock specific action would continue amid progression of earning season. Meanwhile, 24,600 would act as immediate resistance in the upcoming monthly expiry week.

Key point to highlight is that, past four weeks 8% correction hauled daily/weekly stochastic in oversold territory (placed at 12), indicating impending technical pullback. However, formation of higher high-low along with close above previous sessions high would be a pre-requisite for a meaningful pullback.

We believe, we are in structural bull market wherein secondary corrections to the tune of 7-10% in Nifty 50 has been a common phenomenon over past two decades that has eventually offered incremental buying opportunity from medium term perspective. In the meantime, average secondary correction in Midcap and small cap have been to the tune of 12-14% that makes market healthy and set the stage for next leg of up move.

Currently, Nifty 50 has corrected 8% while Midcap and smallcap indices have corrected 10% along with bearish extreme reading on the market breadth. Hence, we believe, one should focus on building quality portfolio by accumulating stocks with strong earnings in a staggered manner from medium term perspective.

The formation of lower high-low signifies corrective bias that makes us revise support base at 23,700-23,500 zone as it is confluence of:

a) 50% retracement of Jun-Sept rally (21,281-26,277), placed at 23,800.

b) Pirce parity of election outcome decline of 9% projected from September high of 26,277.

c) 200 days EMA placed at 23,455.

Stock To Buy This Week - Dharmesh Shah

1. 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 25/10/2024 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.