Stocks to Buy This Week

In the final trading session of the week (Friday, November 22), domestic benchmark indices, Sensex and Nifty 50, bounced back from earlier losses, driven by positive global cues. Strong signals from the US labour market and optimistic sentiment across various Asian markets contributed to this recovery.

By the close of trading on Friday, Nifty 50 ended at 23,907.25, up 557.35 points, while Sensex finished at 79,117.11, gaining 1,961.32 points. This robust rebound reflected growing optimism among investors amid positive global trends.

Vinod Nair, Head of Research at Geojit Financial Services, noted that the market regained earlier losses on Friday, showcasing a strong recovery as investors capitalised on undervalued stocks. However, Nair emphasised that investors are awaiting further clarity on whether this rebound will evolve into a long-term bullish trend. Additionally, market participants are brushing aside concerns regarding Adani and are hopeful that the upcoming state election results will bring more stability.

The results of the Maharashtra and Jharkhand elections will be crucial for market sentiment. In Maharashtra, where the NDA achieved a significant victory, bullish sentiment is expected to strengthen. However, global risks remain, with ongoing tensions between Russia and Ukraine and rising crude oil prices fueling inflationary concerns. Santosh Meena, Head of Research at Swastika Investmart Ltd., highlighted that the direction of Foreign Institutional Investor (FII) flows will be a key factor for markets in the aftermath of recent corrections.

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

- The equity benchmark showed a strong recovery, closing the shortened week on a positive note ahead of the state election outcomes. Nifty 50 gained 1.45%, settling at 23,907. The weekly price action formed a bullish candle with a lower shadow, reflecting support from the long-term rising trend line and the 52-week EMA. The sharp upward movement on Friday helped the index recover intra-week losses and close above the immediate resistance of 23,800.

- Looking ahead, the index is expected to head toward the 24,500 mark in December, bolstered by the state election results, which could boost market sentiment. Nifty 50 is likely to hold the key support level of 23,200. Investors should focus on accumulating stocks with strong earnings potential in a staggered manner.

Key Observations:

- The faster retracement at the 52-week EMA suggests structural improvement in the short term, as five days of declines were reversed in just one session.

- Historically, December has favoured bulls, with an 80% success rate over the past five years, delivering average returns of around 3%.

- The index has a tendency to reverse its course when key Fibonacci numbers are reached, and the current correction has lasted for 8 weeks.

- The breadth indicator (% of stocks above the 50-day SMA in the Nifty 500 universe) has bounced from its bearish extremes, while weekly stochastics have recorded a bullish crossover, signalling an impending pullback.

Sectoral Outlook:

- Positive outlook for BFSI, IT, and pharma sectors, while Infra and PSU stocks present potential bargain-buy opportunities.

- Structurally, since the COVID lows, average intermediate corrections in the Nifty 50 and Bank Nifty have been around 10% and 9%, respectively. With current corrections at 11% for Nifty 50 and 8% for Bank Nifty, both indices are expected to stage a pullback while holding the key support zones of 23,200-22,900.

On the Bank Nifty front, the index has bounced from the lower end of its six-week consolidation range (52,600-50,200), coinciding with the 200-day EMA and long-term rising trend line. The ratio chart of Bank Nifty/Nifty 50 indicates relative outperformance, suggesting the index could challenge the upper band of consolidation (52,600). Key support for Bank Nifty is placed at 49,300, which aligns with the 52-week EMA and the 61.8% retracement of the June-September rally.

Stocks to Buy This Week (Dharmesh Shah):

1. Buy Larsen & Toubro (L&T) in the range of 3,550-3,615 for a target of 4,060 with a stop loss at 3,340.

2. Buy Syngene International in the range of 860-881 for a target of 980 with a stop loss at 819.