Top Stock Recommendations: Dharmesh Shah of ICICI Securities suggests buying Infosys, and IndusInd Bank today

Stock Market News: Monday saw the domestic benchmark indices, Sensex and Nifty 50, opening slightly higher as investors stayed wary ahead of the upcoming Fed rate cut event this week.

The Nifty 50 index commenced the day at 25,406.65 points, marking a 0.2% increase of 50.15 points, while the  Sensex began with a 0.11% surge, gaining 94.39 points to reach 82,985.33.

Global equity markets will be watching the Fed's rate decision on Wednesday, which is expected to have an immediate impact on the direction of the stock market, according to Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. One of the world's greatest performing stock indices is the Nifty 50, which has up 16.7% year to date. The primary driver of the Indian market at the moment is the consistent inflow of domestic money, notwithstanding the country's solid corporate profitability and economic fundamentals.

Following a record-breaking rise in the previous session, the domestic equity benchmark indices, the Sensex and Nifty 50, paused on Friday and ended modestly down due to profit-taking.

The Sensex fell 0.09% to 82,890.94, while the Nifty 50 finished 0.13% down at 25,356.5.

Both indices increased by around 2% for the week, marking the highest advances since June's end. The week's gains were led by a 3% increase in consumer stocks, which are expected to climb in volume and demand owing to a consistent monsoon. A 2.8% rise was anticipated for IT companies, a significant portion of which comes from the United States, ahead of next week's almost certain Fed rate cut.

The major domestic and global economic data, such as India's WPI Inflation (YoY) (Aug), India's Bank Loan Growth, India's Trade Balance (Aug), India FX Reserves (USD), US Core Retail Sales (MoM) (Aug), US Industrial Production (MoM) (Aug), US Fed Interest Rate Decision, US FOMC Economic Projections, US FOMC Press Conference, US Initial Jobless Claims, and China PBoC Loan Prime Rate (Sep), will serve as a guide for the market, according to Palka Arora Chopra, Director of Master Capital Services Ltd.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

The Nifty 50 reclaimed new highs as rate cut hopes and benign inflation expectations helped by good monsoon and lower brent prices boosted on sentiments. Strong FII inflows augmented robust domestic liquidity situation, that helped Nifty 50 to gain 2% (25,356) for the week, ahead of US Fed meeting next week. Nifty Mid cap and Small cap indices gained 2.8% and 1.2% respectively.

The Nifty 50 formed a strong bull candle on weekly time frame as it completely reversed past week’s losses, in faster time, indicating continuation of uptrend. Going forward, we expect index to sustain its upward trajectory and gradually head towards 25,800 while key support is placed at last week lows of 24,750 levels. While volatility around Fed Meeting cannot be ruled out, we advise to deploy buy on dips approach.

Our view is anchored upon following key observations:

Private banks showing signs of strength and with their significant weightage likely to steer Nifty 50 higher.

Sectorally, BFSI, IT, Metals, Consumption are expected to outperform.

Liquidity: FIIs have been net buyers in four out of past five sessions. With prospects of rate cuts in US, we expect FII money returning to EM and India stands to benefit significantly. This is incrementally positive with already robust domestic liquidity.

September seasonality favours buying dips: historically, September volatility with average of 3% decline has provided buying opportunity as 3M forward returns have been around 7% with 78% probability.

Brent: Prices continue their down trend after breakdown from one year consolidation. Expect prices to head towards $67 over coming months while upsides capped at $80.

On the Bank Nifty front, index appears at the cusp of breaking out of Bullis inverse head and shoulder pattern on daily chart. With private banks showing strength and PSU banks being oversold, we expect Bank nifty to head higher towards 52,600 levels in coming weeks while last week lows of 50,400 remains a support.

Top Stock Recommendations

1. Buy Infosys CMP ₹1,943, Target ₹2,110, Stoploss ₹1,810.

2. Buy IndusInd Bank CMP ₹1,462, Target ₹1,620, Stoploss ₹1,330.

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 13/09/2024 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.