Dharmesh Shah of ICICI Securities has recommended two stocks to buy for tomorrow—NTPC and Lemon Tree Hotel

This week, both the Nifty 50 and Sensex, which are India’s key stock market indices, dropped due to factors like foreign investors pulling out money, slower corporate earnings, and rising tensions in the Middle East.

At the end of the week, the Sensex closed at 81,381.36, down 230.05 points (0.28%), while the Nifty 50 finished at 24,964.25, losing 34.20 points (0.14%). This week, the Nifty 50 was down about 0.2%, and the Sensex fell by 0.4%. Last week, both indexes recorded around a 4.5% loss, marking their biggest weekly decline since June 2022.

Expert Opinions

Vinod Nair, Head of Research at Geojit Financial Services, noted that the market was mixed this week, but overall, it ended on a lower note. The Indian stock market is consolidating due to high valuations and a less optimistic outlook for the second quarter earnings. On the other hand, foreign investors are moving their money to Chinese markets, where lower valuations and government stimulus measures are attracting attention. The Reserve Bank of India (RBI) kept its policy neutral, indicating no rate cuts in the near future.

Santosh Meena, Head of Research at Swastika Investmart Ltd., pointed out that despite continued aggressive selling by foreign institutional investors (FIIs), their selling rate has slowed down. FIIs sold roughly ₹28,000 crore, but domestic institutional investors (DIIs) balanced this by buying more than ₹31,000 crore worth of stocks.

Looking Ahead

The upcoming week is expected to bring movements in specific stocks and sectors as several companies release their Q2 earnings. Investors will also keep an eye on India’s Consumer Price Index (CPI) and Wholesale Price Index (WPI) reports.

Market Outlook by Dharmesh Shah, ICICI Securities

Dharmesh Shah, Vice President of ICICI Securities, said the market recouped some intra-week losses despite geopolitical concerns. The RBI’s policy decision and the Haryana state election results helped boost sentiment, allowing the Nifty 50 to close at 24,964, finishing a volatile week on a flat note. The broader market outperformed, gaining over 1%. The Nifty 50 had started the week on a weak note but found support around its 50-day exponential moving average (EMA) after last week’s sharp fall.

Looking forward, the Nifty 50 is expected to trade between 25,500 and 24,700. Stock-specific movements will dominate as the earnings season begins, with major companies, holding over 35% weight in the index, announcing their Q2FY25 results.

The Nifty 50 has a tendency to form a base near its 50-day EMA after a 5-6% drop, setting the stage for a recovery. In this context, the key support level is 24,700, with several factors supporting this prediction:

1. The 61.8% retracement of the August-September rally (23,894-26,277) is placed at 24,800.
2. Last month’s low is at 24,753.

Sector-wise Performance

BFSI, IT, consumption, pharma, and metals are expected to perform well, while capital goods and PSUs offer attractive risk-reward setups.

Crude Oil Outlook

Crude oil prices have eased off after facing resistance in the $80-82 range, as fears of supply disruptions from the Israel-Iran conflict have subsided. Prices are expected to stay between $75-82.

Bank Nifty Outlook

The Bank Nifty index has maintained its long-term rising trend and has avoided a correction of more than 9% on four occasions since July 2023. With an 8% correction already in place, Bank Nifty is expected to form a base and eventually outperform the Nifty. The Bank Nifty index is expected to gradually rise towards 52,400 in the coming weeks.

Stocks to Buy This Week

1. NTPC: Buy within the ₹410-425 range. Target: ₹485, with a stop loss at ₹394.
2. Lemon Tree Hotel: Buy within the ₹121-126 range. Target: ₹142, with a stop loss at ₹113.