ICICI Securities Analyst Recommends Buying JSW Steel and Power Grid Shares

Market Rebounds on Monday, April 27, Despite Disappointing Earnings and Rising Crude Prices

The domestic benchmark indices, Nifty 50 and Sensex, opened higher on Monday, April 27, ending a recent decline. The Nifty 50 rose by 0.73% to reach 24,076.60 at 10:03 IST, while the BSE Sensex increased by 0.77% to hit 77,249.78. This rebound comes after both benchmark indexes dropped by 2.7% each in the previous three trading sessions, affected by elevated crude prices stemming from the Iran war crisis and a bleak earnings outlook from software firms like Infosys and HCL Tech.

Market Outlook Remains Uncertain

Market Outlook by Dharmesh Shah, Vice President, ICICI Securities, reveals that Indian equity benchmarks snapped a three-weeks winning streak to close in the red, pressured by escalating Middle East tensions and surging crude oil prices. The Nifty 50 ended the week at 23,897, marking a 1.90% decline. Interestingly, broader markets displayed notable resilience, with mid-caps dipping a modest 0.8% and small-caps managing to remain flat.

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The IT sector faced the heaviest selling pressure with a 10% slump, while Energy and Pharma emerged as the week's outperformers. The technical outlook indicates that the index opened the week on a positive note and witnessed profit booking around its long-term 200-day EMA. The weekly price action resulted in a bearish candle with a long upper shadow, indicating selling pressure at elevated levels.

Consolidation Phase Expected

Given that the weekly stochastic oscillator is currently in overbought territory (placed at 85), prolongation of ongoing consolidation cannot be ruled out in the upcoming truncated week. Going ahead, we expect the index to oscillate within the broader range of 24,500-23,400 range while sailing through geopolitical volatility and reacting to the ongoing corporate earnings season.

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The current consolidation would make the market healthy, as it strengthens the market's foundation for an eventual push toward the 24,800 mark (aligned with the 200-day EMA) in the coming weeks. Thereby, any decline from hereon should not be construed as negative instead capitalize it to accumulate high-quality stocks on dips backed by strong earnings as strong support is placed at 23,100, being 61.8% retracement of current up move (22,182-24,601) coincided with the gap area (23,555-23,154).

Key Monitorables and Stocks to Buy

Key monitorables include the de-escalation of geopolitical conflict, US Fed policy, IIP data, and further decline in crude oil prices and the US Dollar Index. Dharmesh Shah of ICICI Securities recommends buying JSW Steel Ltd and Power Grid Corporation of India Ltd. Buy JSW Steel in the range of ₹1,240-1,266 with a share price target of ₹1,445 and a stop loss of ₹1,115. Buy Power Grid in the range of ₹306-316 with a share price target of ₹352 and a stop loss of ₹289.