Stock exchange News: Domestic benchmarks Nifty 50 and Sensex on Friday posted their longest weekly decline since August 2023, exacerbating widespread selling as foreign investors continued to pull back and disappointing corporate earnings dampened and more the feeling.

The Sensex fell 662.87 points to end at 79,402.29, while the Nifty 50 fell 218.60 points to end at 24,180.80.

The Nifty 50 was considered overbought on September 27 when it hit record highs. Since then, the index has fallen 8 percent, hit by overseas selling over the past 19 sessions, as investors shift funds to China in response to Beijing’s stimulus initiatives and relatively lower valuations.

Vinod Nair, Head of Research at Geojit Financial Servicesnoted that the domestic market has seen a steady decline due to ongoing selling by foreign institutional investors (FIIs). All sectors were affected, with small- and mid-cap stocks bearing the brunt of the impact, except FMCG. However, domestic institutional investors (DIIs) have been actively buying stocks, which has helped absorb selling pressure and eased the downturn. As a result of this continued selling trend, the domestic market is anticipated to enter oversold conditions.

Market Insights by Dharmesh Shah, Vice President, Securities ICICI

Equity Benchmark extended losses for the fourth straight week, tracking weak earnings along with relentless FII selling. The Nifty 50 settled the week at 24,180, down 2.4%. The broader market bore the brunt of the sell-off in the market, with the Midcap and Smallcap indices down ~6% as a result. The weekly price action resulted in a sizeable bear candle, indicating an extended correction.

Nifty 50 moved lower after breaching key support of 24,400. The lower high-low formation signifies the continuation of the corrective bias where a strong support is placed at the 23,700-23,500 area. In the process, stock-specific actions would continue amid the progress of the earnings season. Meanwhile, 24,600 would act as immediate resistance in the next week’s monthly expiration.

The key point to highlight is that over the past four weeks, the 8% retracement has carried the daily/weekly stochastic into oversold territory (placed at 12), indicating an imminent technical pullback. However, the formation of a high and a low, along with a close above the previous session’s high, would be a prerequisite for a significant pullback.

We believe we are in a structural bull market where secondary corrections of 7-10% in the Nifty 50 have been a common phenomenon over the past two decades, which have ultimately provided incremental buying opportunities from a medium-term perspective. Meanwhile, the average secondary correction in Midcap and small cap was 12-14% which makes the market healthy and set the stage for the next move.

Currently, Nifty 50 has corrected 8% while Midcap and smallcap indices have corrected 10% along with extreme bearish reading across market breadth. Therefore, we believe, one should focus on building a quality portfolio by accumulating stocks with strong earnings in a staggered manner from a medium-term perspective.

The formation below the low signifies a corrective bias that has us revisiting the support base at the 23,700-23,500 area as it is the confluence of:

a) 50% withdrawal of the June-September rally (21,281-26,277), placed at 23,800.

b) The parity of the election result drops by 9%, estimated from the September maximum of 26,277.

c) 200 day EMA placed at 23,455.

Stock to buy this week – Dharmesh Shah

1. Shop Syngene International in the range of 860-881 for the target of 980 with a stop loss of 819.

Disclaimer: The Research Analyst or his or her relatives or I-Sec do not beneficially/beneficially own 1% or more of the subject company’s securities as of the end of 10/25/2024 or have any other financial interest and they have no other financial interest. material conflict of interest.

The opinions and recommendations provided in this analysis are those of individual analysts or brokerage firms, not of the Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.