Despite market sentiment being at bearish extremes, benchmark index NSE Nifty 50 may stage a technical pullback soon from oversold territory. The index may head towards 16,600 in the coming months, said ICICI Direct in its research report. Currently, the benchmark index has approached oversold territory after seven month’s corrective phase amid weak global cues. Thereby offering a decent pullback opportunity in coming months, according to the brokerage report. “Going ahead, we expect the index to resolve higher gradually and extend pullback toward 16600 zone while key support is placed at 14800-14600,” it said. Reliance Industries, Infosys, SBI, M&M, HUL are among the top stock picks.
Extreme bearish reading of sentiment indicators leads to 10% pullback rally in 3 months
The domestic brokerage, in its research, noted that equity benchmarks behaved contrary to their expectations as downbeat global cues tracking anxiety around rising inflation globally, rate hikes weighed on investor sentiments. The velocity of the decline accelerated on breach of March low of 15700 and drifted further to the 15200 mark. Historically, extreme bearish reading of sentiment indicators, as measured by percentage of stocks trading above 200-DMA of Nifty 500 universe, leads to 10 per cent pullback rally in subsequent three months. In the current scenario, 10 per cent will mature at 16,700.
Nifty to gradually resolve higher and extend pullback towards the 16600
“We expect the index to gradually resolve higher and extend pullback towards the 16600 region in coming months wherein strong support is placed in the vicinity of 14800-14600 zone, which we expect to hold as it is 80% retracement of CY-21 rally (13596-18604), at 14600. Thus, dips should be utilised to construct a portfolio by accumulating quality stocks in a staggered manner,” the report said. Historically, investing in such scenarios as the present one has been rewarding over the medium term as the index has not corrected more than 2-3%. Thus, it offers favourable risk reward amid low participation, the brokerage noted.
Top stock picks
BFSI: State Bank of India (SBI), HDFC, Kotak Bank, Federal Bank, Bajaj Finance
Telecom & Technology: Reliance Industries (RIL), TCS, Infosys, L&T Infotech, HCL Technology, Coforge
Capital goods: L&T, ABB, Siemens , BEL, AIA Engineering, ELGI Equipment, Sanghvi Movers, Timken India
Consumption: Hindustan Unilever (HUL), Titan, ITC, Asian Paints, Tata Consumer, Havells India, Jubilant Foods, Astral Poly
Auto: Mahindra & Mahindra (M&M), Maruti Suzuki, Ashok Leyland, Jamna Auto, Mahindra CIE, FIEM Industries, Minda Inds
Infra and Realty: DLF, Brigade Enterprise, Phoenix Mills
Pharma & Chemicals: Divi’s Laboratories, Cipla, Syngene, Torrent Pharma, SRF Ltd
Metal: JSW Steel, Hindalco, Graphite
Others: Adani Port, Indian Hotels, Zee Entertainment, Trent, Concor, Nocil, Balrampur Chinni, BDL, Bluedart, Dixon Technologies, Kansai Nerolac, NRB Bearing
Bank Nifty to hold above crucial support area of 30500-31000; use dips to accumulate quality banking stocks
According to the ICICI Direct report, Bank Nifty index in the last two year’s up move since March 2020 has seen five major corrections to the tune of 18-22%. The average decline comes around 20%. “In the current scenario, with 17% decline already behind us, we expect the index to hold above the crucial support area of 30500-31000 as it is the confluence of the previous major low of April 2021 and the 20% decline from the April 2022 high (38765) around 31000 levels,” it said. Any dips from here on should be used to accumulate quality banking stocks in a staggered manner as the index is expected to hold key support threshold of 30500-31000, it added.
(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)