Stock recommendations for 23 January from MarketSmith India

Nifty 50 advanced 0.53% to settle at 25,289.90, while Sensex climbed nearly 400 points, fueled by a sharp de-escalation in global trade concerns. Market breadth was decisively positive, recording a strong overall advance-decline ratio of 2,344 stocks advancing against 849 declines.

Nifty Media (+2.39%) and PSU Banks (+2.34%) were the major gainers, alongside healthy buying in Pharma and Metals. This relief rally was primarily anchored by US President Trump’s softened stance on European tariffs and renewed optimism regarding a potential bilateral India-US trade agreement. Furthermore, stellar Q3 earnings from Eternal Ltd and Waaree Energies provided a significant domestic catalyst.

Two stock recommendations by MarketSmith India:

Buy: Equitas Small Finance Bank Limited (current price: ₹70)

• Why it’s recommended: Strong presence in microfinance & small-ticket lending, diversified loan book beyond microcredit, improving asset quality trends, focus on retail deposits & CASA growth, expanding branch and digital reach, and an experienced management team.
• Key metrics: P/E: NA, 52-week high: ₹73.33, volume: ₹37.53 crore
• Technical analysis: flat base breakout
• Risk factors: High exposure to unsecured lending, asset quality sensitive to economic cycles, pressure on margins from rising funding costs, regulatory constraints for small finance banks, competition from larger private banks & fintechs, and lower ROE compared to established banks.
• Buy: ₹69.50–70.50
• Target price: ₹80 in two to three months
• Stop loss: ₹65.4

Buy: Canara Bank (current price: ₹154.5)

• Why it’s recommended: Strong PSU backing and systemic importance, improving asset quality with lower NPAs, healthy credit growth momentum, a strong CASA base with a wide branch network, improving profitability and ROE, and a beneficiary of India’s capex and infrastructure cycle.
• Key metrics: P/E: 7.98, 52-week high: ₹159.10, volume: ₹290.76 crore
• Technical analysis: 50-DMA bounce
• Risk factors: PSU ownership limits operational flexibility, sensitivity to economic and credit cycles, slower decision-making compared to private banks, margin pressure from interest rate changes, higher exposure to corporate and infrastructure loans, and government policy and regulatory risks.
• Buy at: ₹154–156
• Target price: ₹168 in two to three months
• Stop loss: ₹148

Nifty 50 recap

Indian equities ended the session on a firm footing, extending recent gains amid broad-based buying interest. Nifty 50 settled at 25,289.90, gaining 132.4 points or 0.53%, after oscillating within a 25,168–25,436 range. The index recovered smartly from intraday lows, reflecting sustained dip-buying support, while holding above its short-term support zone near 25,150. Immediate resistance is seen at around 25,450.

Sensex closed higher in tandem, underscoring positive market breadth. Market participation was decisively constructive, with the advance-decline ratio strongly favouring advances at 2,344 stocks advancing versus 849 declining, indicating healthy underlying sentiment beyond frontline indices.

On the sectoral front, momentum was led by Nifty Pharma, PSU Banks, Media, Metals, and FMCG, each posting solid gains, while IT and Auto also contributed positively. On the flip side, Consumer Durables and Realty witnessed mild profit-taking. Stock-specific action remained active across mid- and small-caps, reinforcing the risk-on tone.

The Nifty 50 is undergoing a short-term correction within a broader uptrend. Recent price action reflects a series of lower highs, with the index slipping below short-term moving averages, signaling easing momentum after the recent rally.

A break below the rising trendline from the October lows indicates a loss of near-term strength, though the overall trend structure remains intact and does not signal a reversal. Momentum indicators reinforce this cautious tone.

The RSI has drifted lower and is currently hovering in the low-40s, reflecting weakening bullish momentum but not yet entering deeply oversold territory, which keeps room open for consolidation-driven volatility. Meanwhile, the MACD remains in negative territory with a widening gap below the signal line, highlighting persistent bearish momentum in the near term. Overall, the technical setup indicates a phase of digestion, where directional clarity is likely to emerge only after momentum indicators stabilise and price action regains strength.

According to O’Neil’s methodology of market direction, the market shifted to a Downtrend after Nifty breached its 100-DMA, indicating weakening intermediate momentum. A rally attempt would emerge if the index closes positive, or in the upper half of its daily range and holds above that low for three consecutive sessions. A subsequent follow-through day (FTD) would be required to confirm a transition back to an Uptrend, signalling renewed institutional participation.

The index displayed resilience in a volatile session by holding above its 200-DMA, reinforcing the broader medium-term construct. On the downside, 24,900–25,000 is expected to provide immediate cushioning, while any deeper corrective move could attract incremental buying interest closer to 24,600. On the upside, the index is likely to remain range-bound with elevated volatility, with near-term movements broadly confined within the 24,900–25,600 band, as market participants await clearer directional cues from macro developments and global cues.

How Nifty Bank performed

Nifty Bank opened on a positive note at 59,194.25, indicating a stable start to the trading session. After the opening, the index faced some selling pressure and slipped to an intraday low of 58,823.05, where buying interest emerged at lower levels. It rebounded from this low and moved higher during the session, reflecting support-based accumulation.

Nifty Bank touched an intraday high of 59,573.10 before settling at 59,200.10, registering a gain of 399.80 points or 0.68% for the day. The recovery from intraday lows suggests that dips are being used as buying opportunities. However, the inability to sustain near the day’s high points leads to cautious sentiment at elevated levels amid ongoing volatility in banking stocks.

Momentum indicators are indicating a phase of consolidation. The 14-period RSI is placed around 47, below the neutral zone, highlighting mild short-term weakness but not an oversold condition. This suggests limited downside momentum at current levels.

The MACD is positioned below the signal line, with a slightly negative histogram, reflecting waning upside momentum after the recent rally. Nevertheless, the broader trend remains intact, supported by prices being held above key medium-term moving averages. According to O’Neil’s methodology of market direction, Nifty Bank remains in a Confirmed Uptrend. Structural strength dominates despite short-term momentum cooling off.

The index wrapped up the trading session in positive territory, successfully snapping its three-day losing streak and offering short-term relief to market participants. During the session, the Nifty Bank index attempted to reclaim its 50-day moving average; however, it failed to sustain above this level due to profit booking at higher prices.

Despite this, the index managed to close on a positive note, reflecting underlying buying interest on declines. From a technical standpoint, strong support is placed near the 100-day moving average around 57,600, while immediate resistance is seen near 60,000, followed by a higher hurdle around the 60,400 zone.

MarketSmith India is a stock research platform and advisory service focused on the Indian stock market. It offers tools and resources to help investors make informed decisions based on the CAN SLIM methodology, founded by legendary investor William J. O'Neil. You can access a 10-day free trial by registering on its website.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.