2 top stock recommendations from Dharmesh Shah

"So, more of volatility is likely to pan out, but we believe it is really a buy on dips market because if you look after all this event, after dollar index coming to 109, we see a dollar at 85.75 and we managed to hold the level of 23,300," says Dharmesh Shah, ICICI Direct.


It seems like a good start of this particular calendar year when it comes to the benchmark indices move. But how do you see Nifty 50 and specifically the kind of recovery what we are seeing from the lower levels? How do you read into it?
Dharmesh Shah: Yes, definitely, the year started on a very rocking start, I would say on a very positive note. We started the year 2025 with Nifty almost up by 500 points in last two trading sessions. Most important part was we managed to break out above the level of 23,900 which was acting as a major resistance in last two trading sessions.
We expect market to see a gradual up move towards 24,500 is likely target for the Nifty in the near term. Yes, there will be times of volatility because January as a month we have lots of events, we have again earnings seasons likely to start by next week. Apart from that US where Mr Donald Trump is going to take the charge on 20th of Jan, so again, that will also have impact on the policies in the entire world. And last but not the least is the budget.

So, more of volatility is likely to pan out, but we believe it is really a buy on dips market because if you look after all this event, after dollar index coming to 109, we see a dollar at 85.75 and we managed to hold the level of 23,300.
We believe going forward yes, market has been respecting the long-term trend line which is if you joining the lows of 2023 and 2024, exactly the support seems to be finding at 200-day EMA and also the 80% retracement of the entire fall.

We believe going forward, 24,500 will definitely be target for the Nifty. But dips should be looked as a buying opportunity. Any dip towards 23,700 to 23,800 should be looked as a buying opportunity.

Help us with your take on the auto pack specifically. Why I ask so is that in the last three months or so, I do not remember that any of these auto majors doing pretty well. But the kind of rebound we are seeing in the last couple of days actually, how do you read into it and any of your top bets over here?
Dharmesh Shah: It definitely is a surprise for everybody for 2025 because nobody expected such a sharp move in just last three trading sessions. But definitely the December auto sales numbers were positive and that is something helping it out right now in terms of price performance.

We believe going forward, yes, definitely auto as an index we remain to be positive for and remain to be, I think, so gradual, the move has been too fast in last two trading sessions, do not forget that most of these stocks were oversold.

To give you an example, like Tata Motors, it was into a heavily oversold territory and what we are seeing also same is happening with the Mauti. So, more of a technical pullback is happening for most of these stocks. Definitely among the auto space we remain to be positive for M&M again. Mahindra & Mahindra, if you look in terms of relative outperformance, it has been clearly outperforming the auto pack. We believe this stock would gradually head towards 3350 is likely target for Mahindra & Mahindra.

Apart from that, again, the two-wheeler space, stocks like Eicher Motor is something one can definitely look out for target of around 5650 and some bit of an auto ancillary space one should definitely look out at the current market price where tyre stocks are the one where we will remain to be positive for.

If you look, crude oil price falling is something a big positive in terms of overall tyre rubber industry.

So, we believe that tyre stocks is one, one should definitely look out from the medium term perspective, stocks like Ceat Tyres, JK Tyres are the ones one should definitely look on buying on dip should be the strategy for most of this auto space.

Globally, we have seen that there was a spike in dollar index and after November 2022, we have seen dollar index touching that 109 mark, how do you read into it and how do you draw the correlation with the Indian metal names because with the kind of rally what we are seeing, all these metal counters are also up in trade today. So, how should one pre-empt the move in the metal counters?
Dharmesh Shah: We believe the way the dollar index has moved after the US election where Mr Donald Trump won the election in the month of November and exactly, you go back to the history of 2016, how it happened.
I think so the dollar index generally has the momentum to move ahead of the election and post, once taking the charge of office, even in 2016 it made a top-up formation. We believe the rhythm should follow in the current direction also. Maybe I think so dollar index is nearing its topping-out formation.

Maybe it is too early to take a call because we have not seen yet the reversal. But we believe 110 to 111 is likely to be a major resistance for dollar index and we should see a reversal from those sides, so around 110 to 111.

Because if you look at the bigger picture, it is more of a lower-top, lower-bottom formation for dollar index. So, yes, dollar index, we expect top out to happen in this range of 110 to 111 and that should augurs well for metal as a space.
So, we believe metal, the risk reward, if you look at it, It is more favourable in metal space and lots of negative news, I can say, is priced in for the metal space.

So, yes, metal, again, we remain to be positive for Tata Steel, JSW Steel, and even Jindal Steel & Power remains to be our top pick inside the metal space.

If you can help us with your top bets at this point in time, any stock would you like to flag off which is like standing out on the technical front?
Dharmesh Shah: Yes, so we remain to be positive for defence space as a whole. We remain to be positive, I would say, the PSU as a space, we remain to be positive because we believe the PSUs are the leaders of this bull market and what we see is a more of a breather in last four months and we expect from here on PSU should resume its upward journey.
So, inside the PSU space, again, we remain to be positive for defence space as a whole. If you look at most of the defence stock they have seen a good correction in last four months, most of these stocks have corrected 25% to 40% from their highs.

Among the defence space, HAL remains to be our top pick, Hindustan Aeronautics, again, the stock seems to be finding the support at the long-term trend line, joining the lows of 2022 and 2023 and 2024 and which also coincides with the 52-week EMA.

So, yes, HAL is the one where the risk-reward looks more favourable from the current levels. We expect the stock to head towards 4685 is likely target for HAL, keeping a stop loss of 3920.

Apart from that, infrastructure as a space, we remain to be positive for. We expect the coming budget and we expect the government spending to improve in the second half, I think so that is again be positive for overall infrastructure space.

And to play the infrastructure proxy plays, I think the cement play I would say. Cement, again, the sector has been into consolidation from 2024, has done nothing, but I would say more of a corrective phase was going on for cement space in 2024.

But it looks like worst seems to be getting over for cement space. We expect demand to pick up in 2025. Also, if you look in terms of price, they have seen a price increase in cement bags in the last 15 days.

So again, I would say, fundamentally also things are getting positive and technically, again, we remain to be positive for JK Cement, where we had a target of around 5320, keeping a stop loss of around 3980.