Stocks to Buy or Sell: ICICI Securities’ Dharmesh Shah Recommends Buy L&T, Syngene International November 25

Stock Market News: In the last trading session of the week (Friday, November 22), domestic indices Sensex and Nifty 50 recovered from earlier losses, supported by encouraging global cues. The turnaround was supported by strong US labor market performance and positive sentiment in various Asian markets.

On Friday, the Nifty 50 closed at 23,907.25, up 557.35 points, while the Sensex closed at 79,117.11, up 1,961.32 points. This strong recovery reflects optimism among investors amid broader market trends.

Vinod Nair, head of research at Geojit Financial Services, said the market on Friday recovered losses incurred earlier in the week with a strong rebound as investors seized the opportunity to buy undervalued stocks. However, investors want more clarity on the trend reversal before concluding that this rebound will develop into a Santa Claus rally. Moreover, investors are dismissing concerns about Adani and are hopeful that the upcoming state election results will bring more stability to the market.

The election results in Maharashtra and Jharkhand will be key indicators for the markets. This is especially true in Maharashtra, where the NDA scored a decisive victory, which is expected to further strengthen the bullish sentiment. However, global factors still pose significant risks. Escalating tensions between Russia and Ukraine, as well as rising crude oil prices, have fueled concerns about inflation. According to Santosh Meena, Head of Research, Swastika Investmart Ltd., the direction of foreign institutional investor (FII) flows will be a deciding factor for the markets after the recent correction.

Market Review, Dharmesh Shah, Vice President, ICICI Securities

The equity index posted a strong recovery to end the shortened week on a positive note ahead of the state election results. Nifty 50 shares gained 1.45% to end a volatile session at 23907. The weekly price action formed a bullish candle with lower shadow, highlighting support efforts emerging from the long-term ascending trendline coinciding with the 52-week EMA in oversold territory. A sharp move higher on Friday helped the index recover intraweek losses and consolidate above the immediate barrier of 23,800.

 Going forward, we expect the index to rise and gradually move closer to the 24,500 mark in December, supported by state election results which will boost market sentiment. That being said, we expect the Nifty 50 to hold the key support threshold of 23200. Hence, accumulating high performing stocks would be a smart strategy to be adopted in a phased manner. Our constructive opinion is based on the following observations:

a) The faster pace of recovery at the 52-week EMA indicates structural improvement in the near term, as a five-session decline was reversed in just one session.

b) The seasonality of the December months over the past five years has favored the bulls with an 80% success rate, with an average return of 3%.

c) The index tends to change course of action when a key Fibonacci number is reached. The current correction has completed 8 weeks.

d) The breadth indicator (% of stocks above 50-day SMA in Nifty 500 Universe) has bounced from its bearish extremes of 12. Meanwhile, the weekly stochastic recorded a bullish crossover in oversold conditions, indicating an impending pullback.

 On a sectoral basis, we remain constructive on BFSI, IT, Pharma while Infra, PSU offer bargain buying opportunities.

 Structurally, since the Covid lows, the average bull market interim corrections have been 10% in Nifty 50 and 9% in Bank Nifty. Given the 11% correction in Nifty 50 and 8% correction in Bank Nifty, we expect the index to maintain the same rhythm and pull back in the coming weeks while holding the key support zone of 23,200-22,900 as this confluence:

a) a 61.8% correction from the June-September rally (21,281-26,277), located at 23,200.

b) A long-term upward trend line that has persisted for the past 2 years.

c) The 52-week EMA is located at 23,146.

 For Bank Nifty, the index bounced from the lower consolidation band of the last six weeks at 52,600-50,200, which coincided with the 200-day EMA and long-term ascending trendline. The Bank Nifty/Nifty 50 ratio chart is slowly moving higher, indicating relative outperformance which leads us to believe that the index will eventually challenge the upper consolidation band (located at 52,600). Meanwhile, key support lies at 49,300 as the 52-week EMA coincides with the 61.8% retracement of the June-September rally (46,077-54,467).

Stocks to buy this week – Dharmesh Shah

1. Buy Larsen & Toubro (L&T) in the range of 3550-3615 with a target of 4060 with a stop loss of 3340.

2. Buy Syngene International in the range of 860-881 with a target of 980 with a stop loss of 819.

Disclaimer: The Research Analyst, his relatives or the I-Sec do not have an actual/beneficial ownership of 1% or more of the securities of the subject company as of the end of 11/22/2024, have no other financial interests and do not have any material conflict of interest.

The opinions and recommendations expressed in this analysis are those of the individual analysts or brokerage firms and not 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.