When asked about the road ahead, Dharmesh Shah from ICICI Direct in an interview to ET Now offered a measured yet optimistic outlook.
“Yes, definitely if you look at the market for last few trading sessions, we have been struggling near the life high which is around 26,300 or market seems to be facing some bit of a selling pressure near this psychological level of around 26,000, expect market to find a strong support in this range of 25,600 to 25,800 being a 50-day moving average and also the 50% retracement of this entire rally.”
He added that this zone should act as a solid cushion if any corrective move deepens and pointed to an important trend that has quietly unfolded over the last two weeks.
“The key point to highlight is that if you look at for the last two weeks, Indian market has been relatively outperforming the global markets. If you look at the US markets, they have corrected almost 6% or even European markets have been down by 5%. But at the same time in this period we have been outperforming by 3.5% on the higher side.”
While the headline indices have held steady, the pain in the smallcap space has been unmistakable. Shah acknowledged this but argued that the downside may be approaching exhaustion.“Yes, definitely the main pain is in the smallcap, that is something hurting the portfolios of all of us. But yes, we again believe that the smallcap is at the very strong support which is at 200-day exponential moving average… we expect smallcap to find a strong support in this range of 17,800 to 17,500… not too much negative for the market, but yes, definitely it is something a buy on dips market where largecaps will clearly outperform the midcaps in the near term.”Where Is the opportunity Now? Banking, Autos, IT Among Top Sectors
With global markets cooling off and Wall Street showing signs of fatigue, sector selection becomes crucial. On this, Shah was clear about his preference.
“If you look at the market, Bank Nifty has been clearly outperforming even in this current corrective phase. So yes, definitely banking remains to be our top pick among all… banking can be looked for target of around 60,000 to 60,500 as far as Bank Nifty is concerned.”
Beyond financials, he sees value emerging across a handful of major sectors.
“Apart from Bank Nifty, again the sectors which we like is auto space as a whole… IT, again, we believe the worst seems to be getting over for it… any positive outcome on India-US trade deal can further trigger the fuel for the market for the IT index.”
He also noted that capital goods — a segment that has lagged for an extended period — may finally be on the verge of a catch-up move in Q2.
Overall, Shah believes investors should capitalize on volatility rather than fear it.
“It is a buy on dips market where again I would say that there will be a volatility and such volatility always gives you a better opportunity to create the portfolio from the medium-term perspective.”
Stock Ideas: PSU Banks Shine; Union Bank and Adani Port on Radar
Shah’s stock-specific ideas further underline his conviction in financials and large, established businesses.
“The banking remains to be our top pick, where inside the banking PSU banks are something which are relatively outperforming… Union Bank remains to be our top pick.”
He highlighted a constructive technical structure developing in the stock:
“The stock seems to be forming a cup and handle pattern… one-and-a-half year of a long consolation breakout seems to panning out for Union Bank. So, at 152, we look for a target of around 168, keeping a stop loss of 138.”
Another name on his list is Adani Port, which has been stuck in a wide consolidation range for over a year.
“Adani Port is something which we like at the current market price… expecting a breakout above 1,500, and look for target of around 1,675, keeping a stop loss of 1,375.”
