Dharmesh Shah of ICICI Securities Recommends Kajaria Ceramics & Natco Pharma as Top Buys Amid Nifty 50 Drop

Stock Market News: Investors were on edge ahead of key US employment data that could impact the Federal Reserve’s decision on interest rates. As a result, India’s major stock indices, the Sensex and Nifty 50, posted their worst week in three months on Friday.

The Sensex dropped by 1,017.23 points, or 1.24%, to close at 81,183.93, its lowest level since August 23. Similarly, the Nifty 50 fell by 292.95 points, or 1.17%, to end at 24,852.15, marking a third straight day of losses.

In the US, the job market grew in August but missed expectations, as per government data. The economy added 142,000 jobs last month, an increase from July’s revised figure of 89,000.

The Securities and Exchange Board of India (SEBI) also set new disclosure rules for foreign institutional investors (FIIs), which created uncertainty in the domestic market, according to Vinod Nair, Head of Research at Geojit Financial Services. However, these changes aren’t expected to hurt India’s appeal for foreign investors in the long term. Still, the market could face a slow phase due to high valuations and limited new drivers.

Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd., said investors will be closely watching the rupee’s performance against the dollar, oil prices, and the investment trends of foreign and domestic institutional investors. He also noted that changes in oil prices and global events could influence market movements in the coming weeks.

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities:

Nifty 50 started the week strong, hitting a new all-time high of 25,333 on Monday. However, global volatility led to profit-taking, causing the index to close 1.45% lower for the week. The Nifty Midcap index fell 1%, while the Small Cap index remained flat.

The Nifty 50 ended a three-week winning streak and formed a bearish pattern on the weekly chart, indicating that profit-taking and a pause in the upward momentum are likely. Shah predicts that the previous week’s high of 25,300 will be a strong resistance in the coming week, with the index potentially undergoing a short-term correction due to overbought conditions. Support is expected around 24,500.

Key observations:

• Historically, September sees increased market volatility both in India and globally. Nifty 50’s recent rally suggests the market may face short-term corrections, which Shah believes is a healthy sign for long-term growth.
• Brent oil prices fell by 7% last week due to concerns over a global slowdown and rising US production.
• In the past 10 sessions, declines have outnumbered gains on 70% of occasions, suggesting that profit-taking could continue for a few more days.
• Sectors like Pharma, FMCG, and IT are expected to perform better, while PSU banks, which are oversold, could bounce back.

For Bank Nifty, the short-term trend remains corrective. Shah expects it to trade between 50,000 and 51,800 in the coming week.

Top Stock Picks:

1. Buy Kajaria Ceramics at ₹1,460. Target: ₹1,595. Stop loss: ₹1,335.
2. Buy Natco Pharma at ₹1,550. Target: ₹1,700. Stop loss: ₹1,425.

Also, stocks like Vedanta, Gujarat Gas, and MSTC will trade ex-dividend next week.