Stocks to buy or sell: Dharmesh Shah of ICICI Securities recommends buying Bank of Baroda, NALCO tomorrow

Stock Market News: On Friday, domestic benchmark indices Sensex and Nifty 50 closed higher, recovering from losses incurred during the opening session.

At the close of trading, the Nifty 50 had gained 104 points or 0.42%, ending at 24,854.05. The Sensex ended at 81,224.75, showing an increase of 218.14 points or 0.27%. Both indices saw a decline of 0.44% and 0.19%, respectively, for the third consecutive week, which was attributed to disappointing corporate earnings and departure of foreign investors from the Indian market.

Following the morning sell-off, Vinod Nair, head of research at Geojit Financial Services, said the market recovered from the oversold level due to selective buying in financial, automotive and metal stocks. Positive initial results from private banks have created expectations for optimistic financial results this weekend. The metals sector also showed a strong performance, benefiting from slightly better than expected growth in China’s third quarter GDP. Rate-sensitive stocks were supported by back-to-back rate cuts by the European Central Bank (ECB).

Market experts anticipate that crucial domestic and global economic indicators such as the Nikkei S&P Global Manufacturing PMI and India Services PMI for October, as well as India’s RBI MPC meeting minutes, along with requests US Unemployment Initials, Manufacturing PMI, Services PMI and S&P Global The October Composite PMI and the October UK Composite PMI will play an important role in determining the path of the market.

Market Insights by Dharmesh Shah, Vice President, ICICI Securities

The benchmark index extended its losses for the third consecutive week despite positive global signals. Nifty 50 closed the week at 24,854, down 0.4%. Friday’s bullish move helped the index recover some of the week’s intraday losses and closed the week on a flat to negative note. As a result, the weekly price action formed a small bearish candle with shadows on both sides, indicating an extended consolidation amidst a specific action of the stock. The key point to note is that Nifty 50 managed to hold the key support of 24,700 amid oversold conditions, indicating an imminent pullback to the expected line.

Going forward, we expect Nifty 50 to hold the key support threshold of 24,700 and challenge the upper band of consolidation located at 25,200, which would eventually open the door for the next leg of upward movement towards 25,500 in the coming weeks.

Structurally, the current 7% correction has made the market healthier as most of the Nifty 50 constituents have moved closer to their key long-term averages, offering a favorable risk reward setup. In a bull market, a 7-10% correction is a common phenomenon. Purchases in such a scenario have been fruitful from a medium-term perspective.

Therefore, accumulating quality large caps would be the prudent strategy to adopt amid the current earnings season. Our positive bias is further validated by the following observations:

A. The Bank Nifty/Nifty 50 ratio chart has resolved upwards after forming a base at long-term cycle lows. As a result, Bank Nifty managed to hold last week’s low amid elevated volatility and ultimately gained ~2% for the week, highlighting its inherent strength. We believe revival in banking stocks would boost Nifty 50 rally as Bank Nifty has 32% weightage in Nifty 50.

B. The break of the two-and-a-half-year consolidation in the Russell 2000 index signifies broader participation that heralds the continuation of the ongoing bullish trend ahead of the US election and expectations of further rate cuts.

C. Crude oil price has fallen by 5% after facing strong resistance in the 80-82 zone. In the coming weeks, we expect it to consolidate in the 72-80 range.

Stocks to buy this week – Dharmesh Shah

1. buy Bank of Baroda in the range of $243-248 for the purpose of $265 with a stop loss of $235.

2. buy National Aluminum Company Ltd (NALCO) in the range of $226-232 target $248 stop loss $219.

Disclaimer: The research analyst or his/her family members or I-Sec do not have beneficial/beneficial ownership of 1% or more of the securities of the subject company, as of the end of 10/18/2024 or have no other financial interest and have no material conflict of interest.

The opinions and recommendations provided in this analysis are those of individual analysts or brokerage firms, not those of Mint. We strongly recommend investors consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.