Indian equity markets extended their losing streak into a fifth consecutive session on Friday, 9 January, setting a cautious tone for the week ahead. Amid this backdrop of sustained selling pressure, research platform MarketSmith India has identified two stocks for potential investment on Monday, 12 January.
Market Recap: A Week of Heavy Losses
The benchmark indices closed deep in the red on Friday. The Sensex plunged 605 points, or 0.72%, to settle at 83,576.24. Similarly, the Nifty 50 dropped 194 points, or 0.75%, to end the day at 25,683.30. The broader market faced even sharper pain, with the BSE Smallcap index tumbling 1.74% and the Midcap index falling 0.90%.
Over the past five trading sessions, the relentless sell-off has dragged the Sensex down by a significant 2,186 points, or 2.5%, with the Nifty 50 mirroring this cumulative loss. This downturn has had a severe impact on investor wealth. The total market capitalisation of firms listed on the BSE has shrunk from over ₹481 lakh crore on 2 January to below ₹468 trillion, wiping out more than ₹13 trillion in value. On 9 January alone, investors saw over ₹4 trillion eroded from their holdings.
MarketSmith India's Stock Recommendations for 12 January
Despite the prevailing market weakness, MarketSmith India, which follows the CAN SLIM methodology pioneered by William J. O'Neil, has pinpointed two buy ideas for investors.
1. Eternal Ltd (Current Price: ₹285)
Why Buy? The recommendation for Eternal Ltd is based on its strong brand, consistent revenue growth, and an expanding customer base. The company benefits from an asset-light business model with high operating leverage and shows an improving trend in profitability. Its digital-first platform is scalable, and it maintains low debt levels with healthy cash generation, supported by favourable industry trends.
Key Metrics & Analysis: The stock is currently trading at a P/E of 915.17, with its 52-week high at ₹368.45. Technically, it is showing a bounce from its 200-day moving average (200-DMA).
Investment Strategy: MarketSmith India advises buying Eternal Ltd in the price range of ₹282 to ₹288. The set target price is ₹318, achievable within two to three months. Investors are advised to place a strict stop loss at ₹270 to manage downside risk.
Risk Factors: Potential challenges include intense competition, sensitivity of margins to costs, risks associated with customer concentration, high marketing expenditures, regulatory uncertainties, and technology disruption.
2. Asian Paints Ltd (Current Price: ₹2,838)
Why Buy? Asian Paints is recommended for its dominant market leadership, strong brand, and extensive dealer network. The company exhibits high pricing power, consistent revenue growth, and robust cash flows. Its balance sheet is nearly debt-free, and it boasts a premium product mix. Expansion into home décor and high returns on equity (ROE) and capital employed (ROCE) add to its appeal.
Key Metrics & Analysis: The stock's P/E stands at 71.24, and its 52-week high is ₹2985.70. The technical chart indicates a trendline breakout pattern.
Investment Strategy: The advisory suggests buying Asian Paints between ₹2,820 and ₹2,850. The target price is set at ₹3,050 for a two to three-month horizon. A stop loss at ₹2,750 is recommended to protect the investment.
Risk Factors: Key risks involve volatility in crude oil prices, input cost inflation, fierce competition, potential weakness in rural demand, a slowdown in the housing sector, and margin pressures.
Market Technical Outlook and Sentiment
The market sentiment on Friday was decidedly weak, with a negative advance-decline ratio of 747 advancing stocks against 2,395 declines. Sectorally, realty, financials, FMCG, and auto stocks were among the worst hit.
From a technical perspective, the Nifty 50's close near the day's low and its break below the 50-day moving average and the 25,700 level has shifted the market status to an "Uptrend Under Pressure" as per O'Neil's methodology. The index now finds immediate support at 25,500, with stronger support around 25,300. To restore a confirmed uptrend, the Nifty needs to decisively break above the recent rally high of 26,373.
The Nifty Bank index also fell nearly 1%, closing at 56,283, and breached its 21-DMA, indicating weakened short-term momentum. It remains in a Confirmed Uptrend but faces resistance near the 60,065-60,100 zone.
Disclaimer: The views and recommendations presented are those of MarketSmith India (William O’Neil India Pvt. Ltd., SEBI Registration No.: INH000015543) and do not represent the views of Mint. Investors are strongly advised to consult with certified experts before making any investment decisions.
