Dharmesh Shah of ICICI Direct stated that it is currently advisable to focus on domestic sectors, particularly banking, which has demonstrated relative outperformance during the ongoing corrective phase. When asked about market expectations amid volatile news, Shah acknowledged that the market conditions are not meeting expectations but suggested that a higher base formation could occur in the current corrective period.
He noted that the market moved from 21,900 to 23,800 points without significant corrections, suggesting that markets often need a reason to decline, whether due to earnings, foreign institutional investor outflows, or, currently, the Trump tariff war, which is exerting pressure on the Indian market. Shah believes the market should stabilize within the range of 22,500 to 22,800, a strong support zone for the Nifty. He anticipates a potential pullback to 23,500 to 23,800, corresponding with the previous high, amidst the upcoming results season, which might trigger more stock-specific movements.
Regarding the Nifty IT sector, which has been under selling pressure, Shah mentioned that post-Trump tariff war, the sector’s charts are unfavorable. He advised focusing on domestic sectors over export-oriented ones. The Nifty IT index’s long-term trendline has seen a breakdown, and Shah believes this trend will continue, indicating that the corrective phase for the IT sector is likely to persist. While a minor pullback might occur due to oversold conditions, medium-term prospects suggest the sector will remain under pressure, with technical rebounds offering exit opportunities.
In terms of promising sectors, Shah pointed out that India’s structural bull market includes corrections, which are currently manifesting. He reiterated a focus on domestic sectors, including banking, which is showing relative outperformance. With an expected rate cut in the upcoming RBI policy, the banking sector is poised for improvement. He is optimistic about NBFCs, particularly AB Capital and L&T Finance, expecting a potential 10% to 50% upside. Shah also expressed positivity towards PSU stocks, including the defense sector, which has priced in recent negatives, showing potential in stocks like HAL and Cochin Shipyard.
Regarding metals, while short-term sentiment-driven selling is noted, Shah views the medium- to long-term outlook positively due to the dollar index’s decline from 110 to 102. He recommended accumulating quality steel stocks like Tata Steel, SAIL, and JSW Steel for a medium-term perspective.