stock picks: 2 top stock recommendations from Dharmesh Shah

“The percentage of CNX 500 stocks trading above the 50-day moving average has improved from 48% to 65%. This suggests the rally should continue, also supported by strong global cues. Even the S&P 500 has seen a breakout after the last four weeks of consolidation,” says Dharmesh Shah, Head-Technical, ICICI Direct.

Well, the market is fairly quiet. What do you expect the mood to be like? What would it take to bring it out of its slumber? Do you anticipate 25,000 soon?
Dharmesh Shah: Yes, definitely. If you recall, last time, we were around 24,300, and we were expecting a gradual recovery in the market. We believe the market should surpass the psychological level of 25,000, and we should be heading towards a target of 25,200 for Nifty. If you look at the structure of the Nifty, it’s more broad-based. The strong previous global cues are supporting the Indian market. But apart from that, if you look at the market breadth, it’s a good indicator to gauge the sentiment. The percentage of CNX 500 stocks trading above the 50-day moving average has improved from 48% to 65%. This suggests the rally should continue, also supported by strong global cues. Even the S&P 500 has seen a breakout after the last four weeks of consolidation.

So, it looks like there is a long way to go for the market. Yes, in the near term, 25,000 being a psychological level, we may see some profit booking. But eventually, we should be heading towards a target of 25,200 for Nifty, with strong support at 24,400.

In terms of sectors, is there anything that looks exciting to you? Would you focus more on defensive plays, or are there other areas you’re interested in?
Dharmesh Shah: Right now, we’re seeing buying across sectors. Yes, banking, which hasn’t been in the limelight for a while, is forming a strong base around the 100-day EMA.

Earlier, we were talking about different sectors when we lost you. Could you share your thoughts on chemicals? Are you looking at anything specific in that space?
Dharmesh Shah: Yes, the chemical sector wasn’t in the spotlight for some time, but over the past two months, many chemical stocks have shown improvement. The technical setup looks more positive. In stocks like Deepak Nitrite, which has rallied from 2,500 to 3,100, we’ve seen some profit booking. However, we believe any dip presents a buying opportunity. We like Deepak Nitrite, and we’re targeting a range of 3,140 to 3,150, with a stop loss around 2,880. Nocil is another stock that’s been consolidating for a long time and has recently broken out. It seems to be retesting previous breakout levels, and we’re looking at a target of 340 to 350.

I’d also like to add that PSU banks present a favorable risk-reward at current levels. We remain positive on stocks like SBI, Canara Bank, and Bank of Baroda. Additionally, the insurance sector is emerging from a long multi-year consolidation. For example, HDFC Life, which has struggled from 2021 to 2024, is showing signs of a breakout.