Stock market news: Domestic equity indices Sensex and Nifty 50 ended their two-week losing streak from the previous trading session, led by information technology (IT) stocks after positive macroeconomic data from the US allayed fears of a recession in the world’s largest economy, leading to greater risk appetite.

The NSE benchmark posted its best session since July 26, while Sensex posted its biggest intraday gain in over two months. The 30-share BSE Sensex rose 1,330.96 points, or 1.68 percent, to close at 80,436.84. The Nifty 50 reclaimed the 24,500-mark, rising 397.40 points, or 1.65 percent, to a two-week high of 24,541.15.

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Market gains were broad-based as the BSE midcap and smallcap indices also rose by two per cent. The total market capitalisation of BSE-listed companies rose to almost ₹451.5 Lakh Crore of ₹444.3 lakh crore, which saved investors over ₹7 lakh crore in a single sitting.

The IT sector was the biggest weekly gainer among the sub-sector indices, with software services majors Tata Consultancy Services (TCS), Infosys and Wipro among the biggest weekly gainers in the Nifty 50 index. IT companies in India generate a significant portion of their revenue from the US.

D-Street experts expect the earnings momentum to continue with a steady growth of ~15 percent over the next two years (FY24-26). Global factors including the US Federal Reserve meeting minutes and Chairman Jerome Powell’s speech at Jackson Hole will largely dictate the market trends this week. After breaking out of the consolidation zone, analysts say the trend for Nifty 50 appears strong and bullish, suggesting that the momentum could continue this week.

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Market outlook by Dharmesh Shah, Vice President, ICICI Securities

Equity indices rallied strongly as recession fears in the US eased following the latest economic data. Consequently, the weekly price action resulted in a bull candle with a higher high-low, indicating a pause in the downside momentum after a two-week breather when support efforts emerged from the 50-day EMA.

A clear close above the last eight-session high of 24,400 along with multi-sector participation suggests a revival in the upside momentum and makes us confident that the Nifty 50 will stabilize on the upside and gradually challenge the all-time high of 25,000 in the coming weeks.

Therefore, any decline from now on should be exploited to accumulate quality stocks as a strong support lies at 24,100. The following observations further confirm our positive bias:

A) Since the beginning of calendar year 2024, Nifty 50 has maintained the rhythm of not correcting for more than two weeks, with the intermediate corrections limited to five percent. The key takeaway is that after such price/time corrections, Nifty 50 tends to surpass the all-time highs in each of the four cases.

B) The volatility index has returned to pre-election levels, indicating that participants do not expect much volatility in the near future.

C) The global equity market regained upward momentum as the S&P 500 index broke out of a four-week downtrend line, confirming the resumption of an uptrend.

Read also: Stock Market Today: Sensex and Nifty 50 gain nearly 2% each; what drove the Indian stock market today? – explained

Profit-taking continued in the broader markets as the percentage of stocks above the 50-day EMA now stands at 49 percent, compared to 60 percent last week. This figure is usually below 35 percent.

In the current context, mid and small caps could consolidate in the coming week before the next leg of the rally begins. The formation of a higher high-low on the weekly chart prompts us to revisit the support base at 24,100 as it is a meeting of the 50-day EMA that coincided with last week’s low.

The Bank Nifty witnessed supportive efforts from the 100-day EMA and formed a doji-like candlestick for the second consecutive week, suggesting a pause in the downside momentum. Going forward, a continuation of strength above the last two-week high (50,800) in the coming week would result in an extended pullback towards 51,800.

The medium-term support for the index is now at 49,650, which results from the confluence of the following factors:
a) 50 percent decline in post-election rally
b) Value of the rising 100-day EMA
c) Lowest level in the last two weeks.

Read also: Experts: US Federal Reserve must “make a big splash with a 50 basis point interest rate cut in September” or risk recession

Top stock recommendations

GAIL: Buy GAIL in the range of ₹232-240 for the goal of ₹278 with a stop loss of ₹224.

Tech Mahindra: Buy Technology Mahindra in the range of ₹1,540-1,585 for the goal of ₹1,750 with a stop loss of ₹1,424.

Disclaimer: The research analyst or his relatives or I-Sec do not own actual/beneficial ownership of 1% or more of the securities of the company concerned as of August 16, 2024 and have no other financial interest or material conflict of interest.

The views and recommendations contained in this analysis are those of individual analysts or brokerage firms and not of Mint. We strongly advise investors to seek advice from certified professionals before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.