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ICICI Direct’s Head Technical Dharmesh Shah expects the Nifty to extend its recovery as easing crude oil prices, a stronger rupee and improving technical indicators support the broader market trend. Shah said a breakout above the 24,600 level could trigger the next leg of rally towards 25,500, while recommending Hyundai Motor and PNB as stock picks.
Shah said that defying global volatility, the equity benchmark staged a strong recovery, supported by easing crude oil prices and a strengthening rupee and ended the week on a positive note at 24,383, gaining 2.6 per cent. The broader market moved in line with the benchmark, rising 2 per cent during the week. He said the beaten-down IT index witnessed a strong rebound, supported by traction in the Auto and Pharma indices. Meanwhile, the Energy index extended its breather for the second consecutive week.
Shah said that the Nifty started the week on a positive note and gradually moved higher as the week progressed. Consequently, the weekly price action has formed a bullish candle, indicating a positive bias.
"Looking at the structural improvement, the breakout from past three months consolidation 24,600-23,100 looks imminent. Hence, breakout above 24,600 would unlock the next leg of up move towards 25,500 in coming months led by Banking, Auto, Metal, Pharma, Defence. Thereby, any decline from current level should be utilise as buying opportunity with strong Q1 earning as strong support is placed around 23800 being 80 per cent retracement of current up move," he said.
Shah said that his constructive stance is based on the following observations:
- Nifty reclaimed its 200 days EMA (24,370) after 5 months. Going ahead, sustainability above the same would be the first sign of conclusion of past three months consolidation.
- After 7 months, Nifty closed above its previous months high, highlights structural improvement in larger degree time-frame.
- After ~11 per cent surge in April, Nifty's 1,500 points consolidation phase absorbed major geopolitical headwinds and formed higher base around the 3-months upward sloping trendline (joining the lows of April and June 2026). Thereby established durable higher base.
- The optimism around Q1 earnings is shifting from large caps to midcaps. Following 5 weeks breather in the vicinity of All time high, the Midcap Index has regained momentum.
- Decline in Brent crude oil (-13 per cent) along with breakdown in US Dollar index provides fuel for the emerging markets.
- Historically, seasonality favours August month, delivering positive returns on six out of ten occasions with an average gain of 3 per cent.
- July Fll's net selling dropped to Rs 6,000 cr. which is drastically low compared to past six months average of Rs 57,000 cr. As global volatility around Al trade mounts, we believe, focus would start shifting back to growth oriented Indian market.
Shah said the key factors in focus are RBI Monetary Policy, falling crude oil prices and the sustenance of the US Dollar index below $100, which would provide a cushion to Indian equities.
Here are the stock recommendations by ICICI Direct:
- Hyundai Motor - Buy in the range of Rs 2,120-2,185 for the target of Rs 2,320 with a stop loss of Rs 2,049
- PNB - Buy in the range of Rs 109-112 for the target of 120 with a stop loss of 106
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
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