ICICI Securities Analyst Recommends Buying Power Grid Shares on 4 May

Market Sentiment Remains Volatile Amid Rising Oil Prices and Geopolitical Tensions

The domestic market indices, Nifty 50 and Sensex, partially recovered from the significant March selloff in April, but the drop on Thursday revealed ongoing vulnerability. The Nifty 50 dropped 0.74% to 23,997.55, while the BSE Sensex fell 0.75% to 76,913.50. The rupee reached an all-time low following an increase in crude oil prices and a more aggressive stance from the U.S. Federal Reserve.

The Indian markets were closed on Friday for a holiday and will reopen on Monday, May 4. Brent crude surged to nearly $126 a barrel during the trading session, marking a four-year high, after Axios reported that the U.S. military was preparing to brief President Donald Trump on new strategies regarding Iran. Geopolitical tensions continued to dampen the market sentiment, yet the Nifty 50 managed to settle the truncated week at 23,998, up 0.4%.

While the benchmark remained stagnant, the broader market showed resilience, with the Midcap and Small-cap indices outshining the frontline index, gaining 0.8% and 2.4%, respectively. Performance across sectors was mixed, with Pharma, Oil & Gas, and IT emerging as top performers, while Financials faced profit booking.

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The spike in crude oil prices weighed on market sentiment, consequently putting pressure on the Indian Rupee. As a result, the index pared intra-week gains and mainly traded in last week's range. The weekly price action formed a bull candle with shadows on either side, indicating an extended breather amid elevated volatility.

Market Outlook

Going forward, we expect healthy consolidation to continue within the 23,400-24,500 range. This sideways movement would help the index cool off from overbought conditions seen post the 11% rally off the April low of 22,181 and aid the index in finding a sustainable base amidst global uncertainty, which would eventually pave the way for the next leg of the up move.

We view the current retracement as a healthy consolidation rather than a trend reversal. Investors should utilise dips to accumulate high-quality stocks with strong Q4 earnings, as strong support is firmly placed at 23,400, which aligns with the 61.8% Fibonacci re-tracement of the recent rally (22,182-24,601) and the gap area of 23,555-23,154 recorded on April 8.

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Market Breadth

The Nifty 500 vs. Nifty 100 ratio chart has shown significant improvement after establishing a higher base above a multi-year breakout level. This trend suggests that the broader market is poised to outperform large caps, signalling a broader rally going forward.

Despite global volatility, the market breadth has been holding steady after showing significant improvement as the current reading of % stocks trading above 50- and 200-day SMA has jumped to 72% and 42% compared to last month's reading of 15%, signalling broadening of a rally that bodes well for the durability of the ongoing up move.

Key Monitorable Developments

• Development of geopolitical conflict
• Assembly election outcome
• Auto sales
• Crude Oil

Stock to Buy This Week

Dharmesh Shah of ICICI Securities recommends buying Power Grid Corporation of India Ltd. Buy Power Grid in the range of ₹306-319. He has a Power Grid share price target of ₹352 with a stop loss of 289.