Top Stock Recommendations: ICICI Securities’ Dharmesh Shah suggests GAIL and Tech Mahindra for tomorrow

Stock Market News: Domestic equity indices Sensex and Nifty 50 snapped their two-week losing streak in the previous session, boosted by information technology (IT) stocks, after positive macroeconomic data in the US allayed fears of a recession in the world’s largest economy, resulting in improved risk appetite.

The benchmark NSE index recorded its best session since July 26, while the Sensex posted its biggest single-day gain in more than two months. The 30-share BSE Sensex index rose 1,330.96 points or 1.68 per cent to close at 80,436.84The Nifty 50 reclaimed the 24,500-mark and rose 397.40 points or 1.65 per cent to close at a two-week high of 24,541.15.

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Market gains were broad-based as the BSE Midcap and Smallcap indices also rose by two per cent. The overall market capitalisation of BSE-listed companies rose to nearly ₹451.5 lakh crore of ₹444.3 lakh crore, making investors richer by more than ₹7 lakh crore in one sitting.

He The IT sector was the biggest gainer in the week among sub-sector indiceswith software services majors Tata Consultancy Services (TCS), Infosys and Wipro among the top weekly gainers on the Nifty 50 index. IT companies in India derive a significant portion of their revenue from the US.

D-Street experts expect the earnings momentum to continue with a steady growth of around 15 per cent over the next two years (FY24-26). Global factors, including the minutes of the US Federal Reserve meeting and Chairman Jerome Powell’s speech at Jackson Hole, will broadly dictate market trends this week. After breaking out of the consolidation range, analysts say the Nifty 50’s trend looks strong and bullish, indicating that the momentum may continue this week.

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Market Insights by Dharmesh Shah, Vice President, ICICI Securities

Equity benchmarks staged a strong recovery as fears of a US recession receded following the latest economic data. Accordingly, the weekly price action resulted in a bullish candle with a higher high and higher low, signaling a pause in bearish momentum after a two-week respite as supportive efforts emerged from the 50-day EMA.

A decisive close above the eight-session high of 24,400, coupled with participation from multiple sectors, signifies renewed upside momentum that makes us confident that the Nifty 50 will resolve higher and gradually challenge the all-time highs of 25,000 in the coming weeks.

Therefore, any dip from now on should be leveraged to accumulate quality stocks as strong support lies at 24,100. The following observations further validate our positive bias:

A) Since the beginning of calendar year 24, the Nifty 50 has maintained a pace of not correcting for more than two weeks, with intermediate corrections limited to five per cent. The key takeaway is that after such price/time corrections, the Nifty 50 tends to break above all-time highs in each of the four instances.

B) The volatility indicator has returned to pre-election levels, indicating that participants do not expect much volatility in the short term.

C) The global stock market regained bullish momentum after the S&P 500 index recorded a breakout of a four-week downward trend line, confirming the resumption of an uptrend.

Read also: Stock Market Today: Sensex and Nifty 50 gain nearly 2% each; what drove Indian stock market today? – explained

Profit-taking in broader markets continued, as the percentage of stocks above the 50-day exponential moving average (EMA) now stands at 49%, down from 60% last week. This ratio typically falls below 35%.

In the current context, mid-cap and small-cap stocks may consolidate in the coming week before the next leg of the rally emerges. The formation of a higher high-low on the weekly chart makes us revisit the support base at 24,100 as it is a confluence of the 50-day EMA coincided with last week’s low.

The Bank Nifty witnessed supportive efforts at the 100-day EMA and formed a doji candle for the second consecutive week, suggesting a pause in the bearish momentum. Looking ahead, continuation of strength above the two-week high (50,800) would lead to an extended pullback in the coming week towards 51,800.

Meanwhile, the medium-term support for the index lies at 49,650, which is a confluence of the following:
a) 50 percent reversal of the post-election surge
b) Value of the ascending 100-day EMA
c) Minimum of the last two weeks.

Read also: US Federal Reserve ‘must cut interest rates by 50 basis points in September’ or risk recession, experts say

Top stock recommendations

GAIL: Buy GAIL In the range of ₹232-240 for the purpose of ₹278 with a stop loss of ₹224.

Mahindra Technology: Buy Mahindra Technology In the range of ₹1,540-1,585 for the target of ₹1,750 with a stop loss of ₹1,424.

Disclaimer: The Research Analyst or his/her family members or I-Sec do not have actual/effective ownership of 1% or more of the securities of the subject company, as of the close of 08/16/2024 or have no other financial interest and do not have any material conflict of interest.

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