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Mumbai Dalal Street is witnessing huge fluctuations and all-round selling since this morning. Bombay Stock Exchange’s major sensitive index Sensex and National Stock Exchange’s Nifty 50, both the major benchmark indices, are seen slipping into the red under heavy pressure. Due to weak signals from global markets, continuous selling by foreign institutional investors (FIIs), uncertainty in international crude oil prices and rise in bond yields, investor sentiment remains completely cautious. Technical analysts have issued a ‘high risk’ alert for intraday and short-term traders amid fears of a breach of key support levels on the technical charts of the market.
However, the history of the stock market is witness to the fact that whenever the index dips into the red and panic selling prevails all around, at the same time smart money and savvy investors get involved in value hunting. Even in such a period of huge decline, there are excellent buying opportunities in companies with strong fundamentals, low debt and strong order book. According to market experts, if traders proceed with proper stoploss and accurate risk management, then even in today’s red flag market, a profitable strategy can be made with risk avoidance in 20 special stocks.
Whenever there is a widespread selloff in the market, liquidity rapidly moves from high-beta and highly valued stocks to defensive sectors. Generally, pharmaceuticals, fast-moving consumer goods (FMCG), energy and coal sectors, and select cash-rich public sector undertakings (PSUs) prove to be the most resilient to market downturns. The demand of these companies is not directly affected by recession and their stable cash flow assures investors of capital security.
Additionally, there are many midcap and largecap stocks that have delivered strong financial results in recent quarters and have recently won large business contracts. Due to the widespread decline in the market, even such best shares are available at discounted rates. On a technical analysis scale, when the Relative Strength Index (RSI) approaches the oversold zone and the stock shows strong support near its 200-day exponential moving average (EMA), there is every possibility of a sharp technical bounceback from there.
Based on technical trends, delivery volumes and institutional support across various sectors of the market, analysts have recommended the following 20 stocks to specifically track in today’s trading:
1. Pharma and Healthcare Sector (Defensive Shield):
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Sun Pharma: Pharma giants are always considered a safe option in market fluctuations. The stock is showing a strong recovery from lower levels driven by global generic demand and strong US pipeline.
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Dr. Reddy’s Lab: Its cash flow remains strong on the back of new launches in Europe and emerging markets and it is at a solid support zone on the technical charts.
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Cipla: The strength of the respiratory portfolio and continued growth in domestic sales make it a strong defensive hedge.
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Aurobindo Pharma: Institutional investors are buying dips due to stability in the formulations and active pharmaceutical ingredients (API) business.
2. FMCG and Consumer Goods (Shares with Fixed Demand):
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ITC Ltd: Due to strong infrastructure of FMCG and hotel business and attractive dividend yield, this stock always remains the first choice of investors in market downturn.
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Hindustan Unilever (HUL): The improving rural demand and stable raw material costs are expected to stabilize the company’s margins.
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Dabur India: The stock is consolidating at attractive valuations due to its leadership in healthcare and Ayurveda segments.
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Nestle India: Value buying is being seen at lower levels due to volume growth in the premium packaged food segment.
3. Energy, Metals and PSU Basket (Strong Dividend and Cash Flow):
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Coal India: The stock recovers in every downturn thanks to record coal shipments for power generation across the country and extremely attractive dividend yields.
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NTPC Limited: Green energy expansion and continued demand for conventional power generation provide it with long-term security.
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Power Grid Corporation: Due to its monopoly position on the country’s transmission network and fixed return model, it remains completely protected from market volatility.
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ONGC: The company’s free cash flow is in an excellent position due to strong upstream realizations at current crude oil levels.
4. Automobile and Consumer Discretionary:
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Mahindra & Mahindra (M&M): It remains the strongest counter in the auto sector due to continuously increasing bookings in the SUV segment and improvement in tractor sales.
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Bajaj Auto: Gradual recovery in export markets and premium motorcycle portfolio are giving it an edge.
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Titan Company: In view of the demand for the upcoming festive and wedding season, it is advisable to buy on dips in the jewelery and watches segment.
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IndiGo / InterGlobe Aviation (IndiGo): It is showing resilience on the charts, backed by a domestic share of over 60% in the aviation sector and a strong passenger load factor.
5. IT, Capital Goods and Specialized Manufacturing:
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TCS: The IT giant is on the radar of value investors in the fall on the back of strong order book and cloud-AI migration deals.
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HCL Tech: Better margin delivery in digital and ER&D services keeps it an outperformer in the IT pack.
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Bharat Electronics Limited (BEL): Due to continuous indigenous defense orders from the Defense Ministry and zero-debt balance sheet, purchases are being seen at every dip.
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Solar Industries: Brokerages continue to maintain a bullish view on this stock on the basis of global order flow in defense and mining explosives.
Investing money blindly in any stock in a declining market can pose serious financial risks. When major indices like Nifty and Bank Nifty are trading below their important support levels, investors and intraday traders should follow very disciplined rules:
The first rule is to avoid ‘catching the falling knife’. That is, do not enter into a stock which is experiencing continuous circuits or heavy institutional selling until it forms a base formation by standing at a strong support level for at least two to three days.
The second rule is the mandatory use of strict stop loss. If you are taking intraday or short-term swing trades, limit your risk to 1.5% to 2%. Also, instead of investing your entire capital in a single sector or share, divide the capital into at least four to five different non-related sectors.
For long term investors, this market is a golden opportunity not to panic, but to add the best quality companies to their portfolio in SIP mode in installments under the ‘Buy on Dips’ strategy.
(Disclaimer: Any investment in the stock market is subject to market financial risks. Please consult your certified SEBI registered financial advisor before deciding to invest or trade in any stock.)