Dharmesh Shah of ICICI Securities has spotlighted two heavyweight stocks for investors to consider. Reliance Industries Ltd and L&T Ltd. Shah’s analysis suggests significant upside potential for both stocks because of the backdrop of fluctuating indices and political uncertainty.
Tuesday’s trading session saw a dip in India’s major benchmarks. The S&P BSE Sensex slipped by 0.22%, closing at 73,843 points, while the NSE Nifty 50 fell by 0.43% to 22,404.50 points. This decline was primarily driven by losses in large-cap banking and IT stocks, contributing to a somber mood in the market.
The Sensex and Nifty 50 ended the previous week on a high note, buoyed by fresh foreign capital inflows and positive global cues. Notably, a special live trading session on Saturday saw the Sensex close at 74,005.94, up by 88.91 points, while the Nifty 50 rose by 35.90 points to 22,502.00. These gains were driven by a strong performance in the small and mid-cap indices, which outpaced the benchmarks, indicating a broader market strength.
Dharmesh Shah highlighted the market’s recent performance, noting a strong recovery from the 100-day EMA. This rebound helped the market recoup most of the previous week’s losses, forming a bullish candle with a small lower shadow. This pattern indicates a robust buying demand at elevated support levels.
Shah emphasized the historical trends observed during election periods, pointing out that the Nifty 50 has typically corrected by around 6% during the polling phase in the past four elections. However, it has also hit new highs around the election outcomes. In the current scenario, the Nifty 50 rebounded after a 4.5% correction from its life highs, suggesting a strong underlying market sentiment.
Over 70% of Nifty constituents are indicating further upside potential, particularly in sectors such as banking, capital goods, oil & gas, power, auto, and FMCG. These sectors are showing a bullish undertone, which bodes well for the market’s future performance.
Shah recommends buying Reliance Industries within the price range of ₹2,820 to ₹2,875. He has set a target price of ₹3,270, with a stop loss at ₹2,730. RIL has consistently demonstrated strong performance, and its robust fundamentals make it a promising pick for investors looking for stability and growth potential.
For Larsen & Toubro Ltd (L&T), Shah suggests purchasing shares in the range of ₹3,400 to ₹3,460. The target price for L&T is ₹3,735, with a stop loss at ₹3,108. L&T’s solid order book and execution capabilities position it well to capitalize on the current bullish trend in the capital goods sector.
Shah maintains a positive stance on the market, expecting the Nifty 50 to challenge its all-time high of 22,800 in the coming weeks. He advises investors to capitalize on market dips as buying opportunities to ride the next leg of the market up move. While volatility is expected to remain high due to the ongoing general elections, Shah believes that once election-related anxiety settles, strong global setups will act as a tailwind for further market direction.
Shah also noted that the India VIX has cooled off after a sharp rise in the past two weeks. This cooling trend is a positive indicator, as the VIX typically rises ahead of elections and then subsides post-election outcomes.
