Top Stock Recommendations: Dharmesh Shah of ICICI Securities suggests buying GAIL, and Kajaria Ceramics today

Stock Market News: As major markets opened down on Monday, the domestic benchmark indices, the Sensex and Nifty 50, had a muted start to the week. Early trading hours revealed a negative outlook, propelled by broader market worries amid uncertainties surrounding the global economy.

The 30-share BSE Sensex opened lower by 324.18 points or 0.42% at 76,885.65 level while the Nifty 50 started off at 23,382.30 level, up 118.80 points or 0.51%.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, expects that the market will probably continue to consolidate. The market’s short-term strength is probably coming from Bank Nifty, which is being supported by institutional purchasing, particularly by FIIs who switched to buying last week. The SEBI probe into Quant Mutual Funds, however, is a little concerning for the market.

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Given that money is moving into fairly priced largecap stocks and profit booking is occurring in certain overheated sectors, the sectoral churn occurring in the market may intensify.

Profit-booking took centre stage on Friday’s session, prompting the domestic benchmark indices, the Nifty 50 and Sensex, to give up early morning gains and remain in the negative throughout the day’s trading.

Market experts noted that the market breadth too favoured the bears as only 18 stocks in Nifty 50 marched higher against 32 stocks which slid down. Interestingly, in broader markets, Nifty MidCap 50 finished slightly above the dotted lines.

One more encouraging observation was that the India VIX continued its downward trend, dropping 1.27% and found it difficult to stay at 13.

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Major domestic and international economic data will determine the market’s perspective next week, according to Arvinder Singh Nanda, Senior Vice President of Master Capital Services. Core PCE Price Index (YoY) (May), US GDP (QoQ) (Q1), Initial Jobless Claims, UK GDP (YoY), UK GDP (QoQ), and India Infrastructure Output (YoY) (May) will be the focus.

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Market Outlook by Dharmesh Shah, Vice President, ICICI Securities

The index started the truncated week on a soft note and witnessed lackluster move throughout the week. The weekly price action formed a high wave candle carrying higher high-low, indicating elevated volatility amid stock specific action.

The continuous sectoral rotation backed by improving market breadth signifies inherent strength that makes us reiterate our positive stance and expect Nifty 50 to gradually head towards 23,800 in coming weeks.

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We believe, index is undergoing time-wise corRECtion after 11% rally (Election Day outcome low) which would make market healthy and pave the way for next leg of up move. Thus, extended breather from hereon should be capitalised as incremental buying opportunity as strong support is placed at 23,000. Our positive bias is further validated by following observations:

a) Revived traction in Bank Nifty would provide impetus for Nifty to resolve higher as Bank Nifty carries ~35% weightage in Nifty 50.

b) Robust price structure backed by improving market breadth highlights strong market internals. Market breadth has shown renewed optimism as stocks above 50-day ema has improvised from 51% just before elections to 84%.

c) Structurally global markets are in an uptrend and unlikely to trigger elevated volatility. Hence, temporary volatility should not be construed as negative.

Structurally, the formation of higher peak and trough signifies elevated buying demand that makes us retain support base at 23000 as it is 20 days EMA.

On expected lines, Bank Nifty resolved higher and clocked a fresh lifetime high. We expect, Banking index to endure its northbound journey and eventually head towards 53,000 in coming weeks while 49,900 would act as key support.

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