Top Stock Recommendations: Dharmesh Shah of ICICI Securities suggests Tata Power, and Bank of Maharashtra for today

Stock Market News: Monday saw the opening of the domesticbenchmark indices, the Sensex and the Nifty 50, at a new high, driven higher by gains in banks following the quarterly results of major lenders, and higher energy stocks following the good profits of power producer NTPC.

As of 9:52 IST, the Sensex gained 0.32% to reach a new high of 81,601.90, while the Nifty 50 increased by 0.33% to a record high of 24,917.65 points.

Dr. V K Vijayakumar, Chief Investment Strategist of Geojit Financial Services, states that encouraging signals have strengthened the bull market's undercurrent. The US economy is expected to have a gentle landing, and the Fed is expected to decrease interest rates in September. This will provide the bull market support on a worldwide scale. Other contributing reasons include the drop in the yield on the US 10-year bond to 4.17% and the drop in the price of Brent oil to $81.2.

Last Friday, against previous patterns, both FIIs and DIIs were buyers, totalling ₹5320 crores and driving a big increase in the market. Given the current circumstances, it is likely that the market will go forward despite the valuation worries.

The five-day losing run was ended on Friday by the domesticbenchmark indices, the Sensex, which gained 1,293 points, and the Nifty 50, which reached a record high thanks to strong value buying at lower prices and a surge in blue-chip companies like Infosys, Airtel, and Reliance Industries.

The Sensex closed at 81,332.72, up 1,292.92 points, or 1.62%. It rose by 1,387.38 points, or 1.73%, to 81,427.18 throughout the day. The Nifty 50 reached an all-time closing high of 24,834.85, up 428.75 points, or 1.76%. Three of the Nifty 50 components finished down, while up to 47 closed in the green.

The emphasis will switch to international cues, especially the US markets, starting next week, according to Santosh Meena, Head of Research at Swastika Investmart Ltd. The market is expecting an interest rate decrease later this year, so the US Federal Reserve's announcement on July 31st will be significant. We will also be keeping a careful eye on more macroeconomic data coming out of China and the US. Regarding the domestic front, Q1 earnings will continue to be a significant trigger, as several major companies are set to release their results.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

The sharp recovery in the Friday’s session helped index to recoup intra-week losses and settle the volatile week at life highs. The weekly price action formed a strong bull candle, indicating buying demand at elevated support base of 20 days EMA.

The index has retraced past four sessions decline in just two sessions, highlighting faster pace of retracement. The faster retracement signifies inherent strength that makes us revised target of 25,200 for coming months. In the process, 24,400 would act as immediate support.

Key point to highlight is that, since start of CY24 (barring election), intermediate correction to the tune of 3%-5% while sustaining above 50 days EMA has offered incremental buying opportunity that has subsequently resulted into fresh All Time High in couple of months. Even in current scenario, index staged a strong rebound after correcting 3% from Life highs. Consequently, we maintain our buy on dips strategy which has fared well over past six months.

Our positive bias is further validated by following observations:

A) The Bank Nifty has witnessed supportive efforts from 50 days EMA while Nifty 50 index witnessed follow through strength post multiyear cup & handle breakout. Tracking in Banking and IT space bodes well for next leg of up move as cumulatively both indices carry >50% weightage in Nifty 50.

B) Net of Advance/Decline (Nifty 500) bottomed out from its bearish extreme reading (-450) around Union Budget and made a sharp reversal.

C) India Vix which is a gauge of market sentiment, crashed 18% for the week as anxiety settled post Budget event, indicating that market participants are not expecting a significant volatility.

D) In US major sector rotation has taken place over past few weeks ahead of US Fed policy in coming week. Dow Jones and Russell 2000 small cap index both have given a significant breakout indicating that rally in US is broadening now.

Structurally, the formation of higher peak and trough signifies buying demand at elevated support base that makes us revise support base at 24400 as it is confluence of:

A) 61.8% retracement of last week’s up moves 24074-24861

B) 20 days EMA is placed at 24340

On the Bank Nifty front, we expect index to stage a rebound and gradually head towards 52,800 while strong support is placed at last week’s low of 50400. In the process, we expect PSU Banks to relatively outperform.

Top Stock Recommendations

1. Buy Tata Power in the range of ₹435-446 for the target of ₹480 with a stop loss of ₹414.

2. Buy Bank of Maharashtra in the range of ₹66-68 for the target of ₹78 with a stop loss of ₹62.

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 26/07/2024 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.