Stocks to buy or sell: Dharmesh Shah of ICICI Securities suggests buying Larsen & Toubro shares tomorrow - 26 May

Stock market news: Indian stock market saw a recovery in the final trading session of the week, with both Sensex and Nifty 50 increasing by approximately 1%, driven by positive sentiment regarding US-China trade talks.

On Friday, the indices were boosted by purchases in major companies like Reliance Industries, HDFC Bank, and ITC. Moreover, expectations of a record dividend from the RBI and declining US treasury yields enhanced investor confidence, according to traders. The Sensex closed at 81,721.08, rising by 769.08 points or 0.95%, while the Nifty 50 finished at 24,853.15, up by 243.45 points or 0.99%.

Analysts pointed out that the Indian stock market faced increased volatility over the past week, mainly due to fluctuations in the global bond markets. Although the week started off strong, disappointing US bond auctions and increasing Treasury yields triggered a global risk-averse attitude, leading to significant midweek sell-offs in Indian stocks.

Looking forward, investors will be monitoring the forthcoming Indian GDP figures, along with US budget announcements, inflation statistics, and weekly jobless claims, to assess the strength and direction of economic recovery both domestically and internationally.

On the technical front, Dharmesh Shah, Vice President at ICICI Securities, expects Nifty 50 to head towards 25,500 in coming months.

Shah has recommended one stock to buy for short-term. Here's what he expects from Indian stock market next week, along with his stock recommendation.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

1. Indian equity benchmarks witnessed rise in volatility amid sharp sell-off in global markets as rising US bond yields and renewed concerns around America’s fiscal health spooked investors. However strong buying demand emerged after taking support at 20-day EMA and 50% retracement of current upmove (23,935-25,116). Nifty 50 settled the week at 24,853, down 0.6%. Broader market relatively outperformed as Smallcap Index gained 0.37%. Meanwhile, Nifty Realty & PSU Banks was major gainer with for the week.
2. The weekly price action formed inside bar candle indicating a breather after witnessing a sharp upmove of 5% in the last week. We belive the current retracement is more of a normal profit booking of the sharp rally witnessed in last week, however the current breather should not be constructed as negative but should be look as a buying opportunity to construct the portfolio from medium term perceptive.
3. In the upcoming week, we expect volatility to remain elevated due to monthly expiry. The index is undergoing a healthy retracement after witnessing sharp up move over last week. The elongation of rallies followed by shallow retracement clearly highlights robust price structure that makes us maintain our positive stance and expect Nifty 50 to head towards 25,500 in coming months. Going forward in the near-term we expect market to form strong base formation (24,200-25,100) which would make the market more healthy and open the next leg of upside in the coming month.
4. For the coming week, strong support is placed at 24,200-24,400 zone. Meanwhile, on the upside, 25,100 would continue to act as immediate resistance.
5. Bank nifty has been sailing through the global volatility, as over last four weeks Index has been consolidating in a broad range (56,098-53,480) after sharp rally of 14% in month of April suggesting healthy retracement. However index managed to hold last week low forming a higher base, that bodes well for next leg of up move towards 57,000 in the coming months.
6. As far as broader market is concern both Nifty Midcap and Small cap Index are resuming uptrend after consolidating above its April breakout area and witnessed shallow retracement indicating inherent strength. Going forward we expect catch up activity in both the Indices in the coming month as currently both the Indices are 7% and 11% away from its All-time high. Historically, maximum average correction in Midcap and small cap indices have been to the tune of 27% and 29% while time wise such correction lasted for 7-8 months. Subsequently, both indices have seen 32% and 28% returns, respectively in next six months.
7. Market breadth is always a good indicator to understand the sentiment of the market in the current context currently 86% stocks of Nifty 500 universe are now trading above their 50-DMA and 39% above their 200-DMA compared to April month’s lowest reading of 27 and 15 respectively, clearly indicating pick up in broader market participation. Key point to highlight is that the current up move is backed by the broad based participation, indicating the current upmove is secular in nature that has been further validated by significant improvement in momentum, breadth as well as sentiment indicators.

Key monitorable which would act as tailwind

a. The US Dollar index is on the verge of breakdown from two years low of 99.50

b. Weakness in Brent crude oil persists at higher levels , currently hovering around 64

c. Bilateral Trade Agreement between India and US

Stocks To Buy This Week - Dharmesh Shah

Dharmesh Shah of ICICI Securities recommends buying Larsen & Toubro shares.

Buy Larsen & Toubro shares in the price range of ₹3,500-3,600. He has Larsen & Toubro share price target of ₹3,928, and suggests maintaining a stop loss of ₹3,264.

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 23/05/2025 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.