Dharmesh Shah from ICICI Direct stated that the optimal focus should be on domestic sectors, particularly banking, which has displayed relative outperformance even during the current corrective phase. When asked about expectations during volatile market conditions affecting chart predictions, Shah acknowledged discrepancies with expectations but suggested that markets are likely to form a higher base during this correction. From 21,900 to 23,800, the market has moved without substantial corrections, indicating a need for a reason to dip. Currently, pressure is attributed to the Trump tariff war, with expectations of maintaining support between 22,500 and 22,800 for the Nifty. There is an anticipated pullback towards 23,500 to 23,800, marking previous highs, as the result season approaches, indicating a future focus on stock-specific actions and consolidation within this range.
Regarding Nifty IT, which has experienced extensive selling pressure, Shah suggested a cautious approach. Post the Trump tariff war, the IT sector charts have shown signs of distress, pointing towards focusing more on domestic rather than export-related areas. The long-term trendline for Nifty IT has broken down, signaling ongoing corrections. Shah indicated that while the IT sector is currently oversold, any technical pullback should be viewed as a chance to exit these stocks. Despite this, Shah recommended avoiding IT from a medium-term perspective due to continued pressure.
In terms of promising sectors, Shah emphasized the importance of sticking to domestic areas, particularly banking, which is expected to benefit from an anticipated rate cut in the upcoming RBI policy. Within banking, both private and PSU banks show potential, with NBFCs like AB Capital and L&T Finance expected to see a 10% to 50% upside. Shah also expressed positivity towards PSU stocks, including the defense sector, which appears to have absorbed most of its negative impact over the past six months. Stocks like HAL and Cochin Shipyard are promising within this sector.
Shah noted a mixed view on the metals sector, identifying potential medium- to long-term gains due to the sale of the dollar index. Despite current selling pressures due to sentiment, Shah suggested that this is an opportune time to consider accumulating quality steel stocks like Tata Steel, SAIL, and JSW Steel from a medium-term perspective.
