Buy these two stocks for near-term gains, charts show strength; Nifty needs to hold above 17550, buy on dips

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By Rahul Shah

FIIs have bought almost Rs 54,000 crore (including primary markets) in Aug’22, their highest since Jan’21. DIIs however turned sellers after 17 months and sold around Rs 7,000 crore. Economic indicators supporting the rally, oil price fell to 7-month low, strong FIIs buying interest, impressive quarterly results announcement and strong PMI data. Even the banking system is seeing a healthy recovery with systemic loan growth at a high of 15.3% YoY recently. The last time systemic loan grew by ~15.3% YoY was in Nov’13.

We expect northbound journeys to continue on Indian bourses not only on account of strong domestic factors but also due to global cues. The global markets climbed up 1-2% against the previous week close (Dow Jones best weekly performance since late July) despite continued tough talk by members of the Fed and ECB’s jumbo interest rate hike (75bps to 1.50%). This means, investors have already priced-in the US Fed to aggressively hike interest rates where market watchers expect a 0.50-basis-point – 75bps increase in the benchmark lending rate – which will now be held in Sept. Investors are taking advantage of enticing valuations with the S&P 500 trading around 16.8 times forward earnings, below the average of 17.2 times over the past decade.

The Cboe Volatility Index, also known as the VIX, fell below 23 after nearly touching 28 earlier in the week and Dollar Index fell to 109 from its recent high of 111. It means, volatility in the global market will cool down and markets are looking for earnings and latest economic data. The US, China, Europe, Australia and India will announce CPI and IIP data next week.

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Back home, expect the rally to continue in the domestic market due to strong macro, continued FIIs buying interest and oil price falling to 7-month low. Sensex gained nearly 1000 points or 2%, biggest weekly gain since July. Better than expected quarterly earnings along with strong PMI data and above normal monsoon will be big positive in the local bourses. FIIs were strong net buyers over Rs6000cr this week while Sensex has shown over 60k intra-day high this week. It is expected that the Indian markets will continue its upward journey and any decline will be good buying opportunity

Nifty has formed an Inside Bar on daily scale but a Bullish candle on weekly frame with long upper shadow. Now, it has to hold above 17550 zones, for an up move towards 17667 and 17777 zones whereas support is placed at 17442 and 17350 zones.

State Bank of India (Target: Rs 590)

State Bank of India has surpassed the falling supply trend line on a weekly scale and is respecting the 20 week average indicating strength in the counter. SBI has formed a strong bullish engulfing candle pattern on the weekly scale and follow up buying is visible. RSI oscillator is also positively placed on weekly and monthly charts and supports are gradually shifting higher. Looking at the overall price structure, we are expecting the stock to inch higher towards 590.

Oberoi Realty (Target: Rs 1,100)

Oberoi Realty has given a consolidation breakout on the weekly scale and has formed a strong bullish candle. On the monthly scale it is making higher highs since the last 3 months and supports are gradually shifting higher. RSI oscillator is positively placed which will support the move towards higher levels. Looking at the overall price structure, we are expecting the stock to inch higher towards 1100 zones.

(Rahul Shah is a Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services. Views expressed are the author’s own.)