Top Stock Recommendations: Dharmesh Shah of ICICI Securities suggests GAIL, Tech Mahindra for tomorrow

Stock Market News: Domestic equity benchmarks Sensex and Nifty 50 snapped their two-week losing streak in the previous session powered 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 better risk appetite.

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

Also Read: Q1FY25 Review: Nifty 50 delivers first single-digit EBITDA growth in four years; Auto, banks lead the pack

The market gains were broad-based, as the BSE Midcap and Smallcap indices also increased by two per cent. The overall market capitalisation of the firms listed on the BSE rose to nearly ₹451.5 lakh crore from ₹444.3 lakh crore, making investors richer by over ₹7 lakh crore in a single session.

The IT sector was the top weekly gainer among the sub-sectoral indexes, with the top software services majors Tata Consultancy Services (TCS), Infosys, and Wipro among the leading weekly gainers on the Nifty 50 index. IT companies in India earn a significant share of their revenue from the US.

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

Also Read: FPIs sell-off rises to ₹21,201 crore in India equities on domestic, global factors; When will inflows resume?
 

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

Equity benchmarks staged a strong recovery as US recession fears subsided after the latest economic data. Consequently, weekly price action resulted in a bull candle carrying a higher high-low, indicating a pause in downward momentum after a two-week breather as supportive efforts emerged from the 50-day EMA.

A decisive close above the past eight sessions’ high of 24,400, along with multi-sector participation, signifies revived upward momentum that makes us confident that the Nifty 50 will resolve higher and gradually challenge the life highs of 25,000 in coming weeks. 

Thus, any dip from hereon should be capitalized to accumulate quality stocks as strong support is placed at 24,100. The following observations further validate our positive bias:

A) Since the beginning of CY24, Nifty 50 has maintained the rhythm 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, Nifty 50 tends to surpass life highs in each of the four instances.

B) The volatility gauge has reverted to pre-election levels, signalling that not much volatility is expected in the near term by participants

C) The global equity market regained upward momentum as the S&P 500 index logged a breakout from a four-week-falling trend line, which confirms the resumption of an uptrend.

Also Read: Stock market today: Sensex, Nifty 50 gain nearly 2% each; what drove the Indian stock market today? – explained

Profit-taking in broader markets continued, as the percentage of stocks above 50-day ema is now at 49 per cent, down from 60 per cent last week. This ratio usually bottoms out below 35 per cent. 

In the current context, mid-and small-caps 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 revise the support base at 24,100 as it is a confluence of 50 days EMA coincided with last week’s low

The Bank Nifty witnessed supportive efforts from the 100-day EMA and formed a doji-like candle for the second consecutive week, suggesting a pause in downward momentum.  Going ahead, follow-through strength above the past two weeks’ high (50,800) would lead to an extended pullback in the coming week towards 51,800. 

Meanwhile, medium-term support for the index is placed at 49,650, which is a confluence of the following:
a) 50 per cent retracement of the post-election rally
b) Value of rising 100-day EMA
c) Past two weeks low.
 

Also Read: US Federal Reserve ‘must go big with 50 bps interest rate cut in September’ or risk recession: Experts
 

Top Stock Recommendations
 

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

Tech Mahindra: Buy Tech Mahindra 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 relatives or I-Sec do not have actual/beneficial ownership of 1% or more securities of the subject company, at the end of 16/08/2024 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.