Top Stock Recommendations: Dharmesh Shah of ICICI Securities suggests buying SBI, and Jindal Steel & Power today

Stock Market News: The domestic benchmark indices, the Sensex and the Nifty 50, began Monday's session in red amid mixed global cues ahead of macro data. According to analysts, Indian stock market remain resistive in the face of growing market volatility, while the India VIX increased by 14% and surpassed 21 levels for the first time since September 2022.

Few experts attribute the volatility to investors' concerns about the upcoming elections, which are leading them to be cautious.

The Nifty 50 started off at 22,027.95, down 27.25 points (0.12%), while the Sensex slipped 187.82 points (0.26%) to 72,476.65. The broader indices opened in mixed territory. The Bank Nifty index kicked off down by 31.30 points, or 0.07%, at 47,389.80.

Also Read: Sensex Today Live Updates : Sensex down 430pts, Nifty at 21,930; TaMo down 6%, ABB, Cipla, Dr. Lal PathLabs gain over 5%

According to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, there is confusion over the rationale for the intense FPI selling in May. According to media estimates, FPI selling might lead to electoral consequences for the NDA/BJP. It is critical to recognize that FPI selling is the result of a shift in FPI strategy from'sell China, buy India' to'sell India, buy China'. This shift in approach was prompted by China's recent outperformance (Shanghai Composite up 3.96% and Hang Seng up 10.93% in the last month) and India's underperformance (Nifty 50 down 2.06% in the previous month).

The Sensex and Nifty 50, ended a four-day losing skid and regained stronger ground on Friday due to a surge in market heavyweights Reliance Industries, ITC, and Bharti Airtel along with a positive trend overseas.

The 30-share BSE Sensex ended higher by 260.30 points or 0.36% at 72,664.47 level while the Nifty 50 closed at 22,055.20 level, up 97.70 points or 0.44%. India VIX was at 18.60, up 2.20% for the day.

Following four days of losses, the benchmark Nifty 50 saw some buying, according to analysts. Interestingly, value and bargain seeking were the most popular themes, with Nifty MidCap up 1.19% and Nifty SmallCap up +0.7%.

Also Read: Lok Sabha Election 2024: Market erases nearly ₹10 lakh crore in a week; will the selloff continue after result?

Three favourable triggers were the weak WTI oil price at $79 per barrel, stable global signals, and investor bets that were reinforced in anticipation of the Federal Reserve's September interest rate cuts.

This week's market outlook will be shaped by key domestic and international economic data, as well as data from India's WPI manufacturing and inflation index, the US PPI, Core CPI, Initial Jobless Claims, Core Retail Sales, Japan's GDP, India's Q4 corporate results, and a speech by Fed Chairman Jerome Powell.

Also Read: Stock market today: Sensex, Nifty 50 end the week 2% lower; experts expect volatility to continue in the near term

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

• Going ahead, we expect the index to consolidate in the broader range of 21,700–22,400 amid elevated volatility. The recent correction has hauled Nifty 50 to the lower band of the five-month rising channel. The key point to highlight is that, since the start of CY24, intermediate corrections have been arrested within 4.5%, and subsequently, Nifty 50 has recorded a new high. In the current scenario, a 4.5% correction will mature around 21,700, which also coincides with 100 days of EMA. Thus, we advise traders to refrain from creating aggressive short positions near the key support zone amid an oversold condition as the daily stochastic oscillator is hovering at 12. Thus, the ongoing corrective decline should be capitalised to accumulate quality stocks, as strong support is placed at 21,700.

• Key observations during election phases:

• A) Over the past four elections, the Nifty 50 has undergone an average 6% correction during polling phases. In the current context, the index has corrected ~4% from life highs and remains in sync with empirical evidence.

• B) The India VIX has a tendency to rise ahead of the election and eventually fizzle out post-election outcomes as anxiety around the event settles down. During May 2019, a rise in VIX resulted in a decline in the index, which in turn helped the Nifty 50 form a higher base and set the stage for the next leg of up move.

• On the upside 22,400–22,500 would now act as immediate resistance as it is the confluence of:

a) 61.8% retracement of the current decline 22,794-21,932.

b) Last week’s high was placed at 22,588.

Also Read: Stock Movers | Tata Motors, HDFC Bank among top 10 Nifty 50 stocks that swung 3-9% in first 7 sessions of May

Bank Nifty Outlook:

Since the Feb-24 low, the Bank Nifty has been witnessing a peculiar pattern wherein, after a 5% correction, it subsequently rallies to 7%. In the current scenario, with a 5% correction already in place, we expect Bank Nifty to maintain the same rhythm and pose a decent pullback amid oversold conditions. In the coming week, we expect Bank Nifty to undergo base formation in the 47,000–48,500 zone, which will set the stage for the next leg of the up move.

Top Stock Recommendations:

Buy State Bank of India (SBI) in the range of ₹800-818 for the target of ₹890 with a stop loss of ₹745.

Buy Jindal Steel & Power Ltd in the range of ₹900–930 for the target of ₹1,050 with a stop loss of ₹848.

Also Read: FPIs turn aggressive sellers on market crash; offload ₹17,083 crore in Indian equities: When will buying resume?

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 10/05/2024 (preceding date) or have no other financial interest and do not have any material conflict of interest.

The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.