Stock recommendations for 12 January from MarketSmith India

The Sensex crashed 605 points, or 0.72%, to end at 83,576.24, while the Nifty 50 declined 194 points, or 0.75%, to close at 25,683.30. The BSE Midcap index dropped 0.90% while the Smallcap index plunged 1.74%.

Five sessions of sell-off have dragged the Sensex down by 2,186 points, or 2.5%. The Nifty 50 has also suffered a cumulative loss of 2.5% over the past five days.

Investors have lost over ₹13 trillion in five days as the overall market capitalisation of BSE-listed firms dropped to below ₹468 trillion from over ₹481 lakh crore on 2 January. On January 9 alone, investors' wealth was eroded by more than ₹4 trillion.

Two stock recommendations by MarketSmith India:

Buy: Eternal Ltd (current price: ₹285)

• Why it’s recommended: Strong brand and market presence, consistent revenue growth, expanding customer base, asset-light business model, high operating leverage, improving profitability trend, digital-first scalable platform, low debt levels, healthy cash generation, and favourable industry tailwinds.
• Key metrics: P/E: 915.17, 52-week high: ₹368.45, volume: ₹1,605.96 crore
• Technical analysis: 200-DMA bounce
• Risk factors: Intense competitive pressure, margin sensitivity to costs, customer concentration risk, high marketing spends, regulatory uncertainties, technology disruption risk, dependence on demand cycles, valuation volatility, execution risk in expansion, and market sentiment swings.
• Buy at: ₹282–288
• Target price: ₹318 in two to three months
• Stop loss: ₹270

Buy: Asian Paints Ltd (current price: ₹2,838)

• Why it’s recommended: Strong brand leadership, dominant market share, wide dealer network, high pricing power, consistent revenue growth, strong cash flows, low-debt balance sheet, premium product mix, home décor expansion, and high ROE and ROCE.
• Key metrics: P/E: 71.24; 52-week high: ₹2985.70; volume: ₹468.93 crore
• Technical analysis: trendline breakout
• Risk factors: Crude oil price volatility, input cost inflation, intense competition, rural demand weakness, housing slowdown risk, margin pressure, aggressive discounting, entry of new brands, regulatory changes, and slower volume growth.
• Buy at: ₹2,820–2,850
• Target price: ₹3,050 in two to three months
• Stop loss: ₹2,750

Nifty 50 recap

Indian equities closed lower on Friday, weighed down by broad-based selling across sectors amid weak market breadth. Nifty 50 declined 0.75% to end at 25,683, after trading in a volatile range of 25,623–25,941, while Sensex closed in the red, reflecting sustained intraday pressure.

Market sentiment remained fragile as the advance-decline ratio was sharply negative, with 747 stocks advancing against 2,395 declines, underscoring the risk-off tone across the broader market. On the sectoral front, defensives offered limited support, with Nifty IT and Oil & Gas ending marginally higher. Meanwhile, most cyclical, and consumption-oriented sectors saw losses. Realty was the worst performer, followed by Financials, FMCG, and Auto stocks, as profit booking persisted at higher levels. Banking stocks, particularly private lenders and non-bank financials, dragged the indices, while PSU Banks showed mild resilience.

Nifty 50 price action in the latest session shows a clear loss of momentum, with the index forming a bearish candle near the lower end of the channel. The inability to sustain above the short-term moving averages and the close near the day’s low indicate increasing supply at higher levels and a shift toward consolidation within the broader uptrend.

From a momentum perspective, the RSI has drifted lower and is currently hovering in the mid-40s to low-50s zone, slipping below its recent trendline. This suggests weakening bullish strength and a transition from strong momentum to a more neutral-to-soft bias, though not yet in oversold territory. The RSI structure points to distribution rather than aggressive capitulation. The MACD has flattened and moved closer to the signal line, with histogram bars turning negative, highlighting a slowdown in trend strength.

According to O’Neil’s methodology of market direction, Nifty breaching the 50-DMA and 25,700 has shifted the market status to an “Uptrend Under Pressure." Further deterioration into a Downtrend is possible if distribution days continue to rise or if the index fails to hold above its 100- and 200-DMA. Conversely, a decisive breakout above 26,373 the recent rally high is required to restore a Confirmed Uptrend.

The index decisively broken below its 50-DMA, and the key 25,700 level on higher volumes, indicating the onset of a corrective phase within the broader uptrend. On the downside, immediate support is seen at 25,500, followed by a stronger demand zone around 25,300. For the broader uptrend to regain momentum, the index will need to reclaim and sustain levels above 26,000. A decisive move above this mark could restore market confidence and open the path for a gradual recovery towards 26,300.

How Nifty Bank performed?

Nifty Bank opened on a negative note and traded with a weak undertone throughout the session. After opening at 56,524, the index attempted an early recovery but faced selling pressure near the intraday high of 56,705, following which profit booking emerged at higher levels. The selling momentum intensified in the latter half, dragging the index to an intraday low of 56,205. Despite a mild bounce from the day’s low, the recovery lacked strength, and the index eventually closed at 56,283, ending the session with a loss of nearly one percent.

The price action reflects short-term exhaustion after the recent up-move, as participants preferred to book profits near overhead resistance. Overall sentiment remained cautious, with volatility picking up marginally during the decline.

From an indicator perspective, the RSI (14) positioned near 47–48, slipping below its average and indicating a loss of bullish momentum, though it remains far from oversold territory. This suggests a phase of consolidation rather than outright trend reversal. The MACD remains on a sell mode with the histogram in negative territory, reflecting weakening upside momentum in the near term. According to O’Neil’s methodology of market direction, the index remains in a Confirmed Uptrend. The setup indicates a pause within an ongoing uptrend rather than a breakdown, keeping medium-term bias constructive.

Nifty Bank ended the session on a negative note, reflecting sustained profit booking and a decisive breach of its 21-DMA, which has weakened short-term momentum. Continued selling pressure from current levels could drag the index toward its 50-DMA, placed roughly 200 points below, which is expected to act as important near-term support.

A breakdown below this level may further dampen sentiment and extend the corrective phase. The overall market tone has turned cautious, warranting close monitoring of support. On the upside, 60,065–60,100 remains an immediate resistance band. A decisive close above this range could restore bullish momentum and pave the way for a move toward 60,800–61,000.

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.

Trade name: William O’Neil India Pvt. Ltd.

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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.