Sensex & Nifty Rebound: Dharmesh Shah of ICICI Securities Recommends Bank of Baroda and NALCO for Strong Gains

On Friday, the Indian stock market indices, Sensex and Nifty 50, closed higher after a tough start. By the end of the day, Nifty 50 gained 104 points (0.42%), closing at 24,854.05, and the Sensex increased by 218.14 points (0.27%) to 81,224.75.

Even though both indices gained on Friday, they still ended the week lower for the third straight week. Nifty 50 dropped by 0.44% and Sensex fell by 0.19%. This was mainly because of weaker-than-expected corporate earnings and foreign investors pulling out money from the Indian market.

Market Rebound Driven by Selective Buying

Vinod Nair, Head of Research at Geojit Financial Services, explained that the market bounced back after the morning sell-off, thanks to selective buying in financial, auto, and metals stocks. Positive earnings from private banks have created hope for better financial results in the coming days. The metals sector also did well, boosted by better-than-expected growth in China’s Q3 GDP. Stocks sensitive to interest rates were helped by recent rate cuts from the European Central Bank (ECB).

Key Economic Data to Watch

Experts are closely watching key economic indicators that could impact the market. These include India’s Manufacturing PMI and Services PMI for October, as well as RBI meeting minutes. In the global market, important reports like US jobless claims, Manufacturing PMI, Services PMI, and Composite PMI, along with the UK’s Composite PMI, will also influence market movement.

Market Outlook by Dharmesh Shah of ICICI Securities

Dharmesh Shah, Vice President at ICICI Securities, noted that the Nifty 50 index fell for the third consecutive week, even though global cues were positive. The index ended the week at 24,854, down by 0.4%. Friday’s recovery helped reduce some losses from earlier in the week.

Shah highlighted that Nifty 50 has managed to hold its key support level of 24,700, suggesting a possible market pullback. He expects Nifty 50 to stay above this level and possibly move towards 25,200, which could lead to a further rally to 25,500 in the coming weeks.

According to Shah, the current 7% market correction has made the market healthier, as many stocks in the Nifty 50 index have now reached their long-term average prices, offering good buying opportunities.

Reasons for Optimism

Shah believes buying quality large-cap stocks during this earnings season is a good strategy. He gives three reasons for this positive outlook:

1. Banking Stocks Strength: The ratio of Bank Nifty to Nifty 50 has moved higher, showing strength in banking stocks. Bank Nifty gained about 2% during the week, and Shah believes this strength will help Nifty 50 recover since Bank Nifty holds a 32% weight in the Nifty 50 index.
2. Russell 2000 Breakout: The Russell 2000 index in the US has broken out of a two-and-a-half-year consolidation, indicating broad market participation. This supports the ongoing bull market, especially with the US election coming up and expectations of more rate cuts.
3. Crude Oil Prices: Crude oil prices have dropped 5% after hitting resistance at $80-82 per barrel. Shah expects oil to trade in the $72-80 range in the coming weeks, which could help stabilize the market.

Stock Picks by Dharmesh Shah

Shah recommends buying two stocks this week:

1. Bank of Baroda: Buy in the range of ₹243-248, with a target price of ₹265 and a stop loss at ₹235.
2. NALCO (National Aluminium Company): Buy in the range of ₹226-232, with a target price of ₹248 and a stop loss at ₹219.