The bearish days are numbered, build a quality portfolio in the markets. These stocks are hot picks


On Friday, Sensex finished at 52,727.98 up 462.26 points or 0.88%. Nifty 50 closed at 15,699.25 over 142.60 points or 0.92%.

Both benchmarks gained nearly 3% each from June 20-24. During these days, the wealth of investors on BSE soared by 7 40,977.89 crores.

BSE’s market capitalization stood at 234 86,923.67 crore on June 20 and jumped to 242,27,901.56 crore on June 24.

Research analysts – Dharmesh Shah, Nitin Kunte, CMT, Pabitro Mukherjee and Vinayak Parmar at ICICI Securities said in their technical note that equity benchmarks performed contrary to our expectations as pessimistic global signals following the anxiety over rising inflation globally, rate hikes weighed on investor sentiment .

On Nifty 50, they said the speed of the decline accelerated when breaking the March low at 15,700 and drifted down to the 15,200 mark.

Looking ahead, analysts said: “We expect the index to gradually resolve to the upside and extend the pullback towards the 16600 regions in the coming months, where strong support is placed near the 14800- 14600, which we expect to hold as it is the 80% retracement of the CY-21 rally (13596-18604), at 14600. Thus, dips should be used to build a portfolio by accumulating quality stocks in a staggered fashion.”

The positive bias of ICICI Securities analysts is based on four factors:

1. Reading the percentage of stocks above 200 DMA below 15 signifies extreme pessimism in the markets which ultimately leads to a technical pullback of a minimum of 10% in the following three months.

2. The index has already corrected 18% from life highs and approached the oversold reading on the weekly momentum oscillator. The weekly RSI approached its lowest level (placed at 35) since May 2020. Historically, a reading of 35 on the weekly RSI has produced a decent pullback, and analysts expect this pace to continue in the coming months.

3. India continues to relatively outperform the EM basket, even in the ongoing correction phase, despite heavy selling by FIIs. Over the past year, while the MSCI EM index has corrected over 40% from highs, India has relatively outperformed, with the benchmark correcting only 18%.

4. India’s VIX and Crude Oil prices have cooled off the recent high. Indian stocks have an inverse correlation with the Indian VIX. Thus, giving impetus to the acceleration of the ongoing withdrawal.

They added: “On the broader front of the market, in three instances over the past decade, the intermediate correction of the Nifty Midcap, Small cap indices has been in the range of 28% and 40%, respectively. Currently, both indices have corrected 25% and 34%, respectively.”

Therefore, according to analysts, “any further correction will likely be short-lived in oversold territory and set the stage for a technical pullback in the coming weeks.”

Here are the top picks from ICICI Securities analysts:

BFSI – SBI, HDFC, Kotak Bank, Federal Bank and Bajaj Finance.

Telecom and technology – Reliance, TCS, Infosys, L&T Infotech, HCL Technology and Coforge.

Capital Goods – L&T, ABB, Siemens, BEL, AIA Engineering, ELGI Equipment, Sanghvi Movers and Timken India.

Consumer – Hindustan Unilever, Titan, ITC, Asian Paints, Tata Consumer, Havells India, Jubilant Foods and Astral Poly.

Auto – M&M, Maruti Suzuki, Ashok Leyland, Jamna Auto, Mahindra CIE, FIEM Industries and Minda Industries.

Infrastructure and real estate – DLF LTD, Brigade Enterprise and Phoenix Mills.

Pharmaceuticals and Chemicals – Divi Laboratories, Cipla, Syngene, Torrent Pharma and SRF Ltd.

Metal – JSW Steel, Hindalco and Graphite.

Others – Adani Port, Indian Hotels, Zee Entertainment, Trent, Concor, Nocil, Balrampur Chinni, BDL, Bluedart, Dixon Technologies, Kansai Nerolac and NRB Bearing.

Weekly Market Outlook:

For the week of June 27-July 1, ICICI Direct analysts expect Nifty to finally resolve the past falling channel placed at 15800 and gradually move towards the 16200 levels in the coming weeks. In the expiry week, use dips towards 15400 to create long positions as the index is poised for extreme oversold readings.

Analysts at ICICI Direct added that brent oil prices broke the weekly uptrend line indicating loss of momentum and “we expect upside to be capped in the 125-130 area.”

According to analysts at ICICI Direct, among sector preferences, IT and BFSI are key sectors with a favorable risk/reward ratio, while Automotive and Capital Goods are expected to extend their outperformance. Analysts Prefer – SBI, HDFC, Kotak Bank, TCS, Maruti Suzuki, ITC and Titan in Large Caps while in Mid Caps we like KPIT Technologies, Federal Bank, AIA Engineering, NRB Bearings, Ashok Leyland, Automotive Axles, Bharat Electronics, Havells, Trent and Indian Hotel.

Yesha Shah, head of equity research at Samco Securities, said: “A host of events could affect market sentiment in the coming week. Globally, investors will be carefully analyzing the rate numbers. of quarterly U.S. GDP growth. The U.S. would officially enter a recession if it posts negative growth, which could have a ripple effect on global markets.”

“In India, vehicle sales numbers will continue to fuel stock-specific moves on D-Street as investors try to decipher the future trend,” Shah added, “Additionally, the monthly expiration of F&Os in the second half of the week can bring volatility, so investors are advised to accumulate good stocks with strong fundamentals, free cash flow and lower leverage over the long term while ignoring short-term difficulties.”

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