Stock recommendations for 3 November from MarketSmith India

The Nifty rose 387.70 points, or 1.68%, to settle at 23,440.80, also its highest close in more than five weeks. Among the 30 Sensex constituents, Reliance Industries led the gains, surging 11.64% after reporting a record quarterly profit of ₹29,550 crore for July-September, up 33.8% from a year earlier. Strong performance in its oil-to-chemicals business, driven by higher global fuel margins, and growth in its telecom arm offset relatively subdued performance in retail.

Two stock recommendations by MarketSmith India: Buy: Tanla Platforms Ltd (current price: ₹644) Buy: Leela Palaces Hotels & Resorts Ltd (current price: ₹671) How Nifty 50 performed Indian equity markets ended Monday's session on a strong note, with the Nifty 50 surging 387.70 points, or 1.68%, to close at 23,440.80, against its previous close of 23,053.10. The index opened at 23,222.30, touched an intraday low of 23,207.05 and closed at the day's high, indicating strong buying momentum towards the end of the session.

Broader market participation was encouraging, with 2,445 stocks advancing, 1,164 declining and 104 remaining unchanged, translating into an advance-decline ratio of 2.10:1. Sectoral indices were largely in the green, led by Nifty Oil & Gas (+5.95%), Metal (+3.21%), Consumer Durables (+2.70%), PSU Bank (+1.36%) and Auto (+1.33%). Media (-0.76%), IT (-0.50%) and Private Bank (-0.14%) were among the few sectors that ended lower.

The Nifty 50 formed a strong bullish candle on the daily chart, closing at the session's high. Its sharp recovery from recent lows points to renewed buying interest and improving short-term momentum. The index has reclaimed its 20-day and 50-day exponential moving averages (EMAs), signalling a possible near-term trend reversal. However, it continues to trade below its 100-day and 200-day moving averages, suggesting that the broader trend remains cautious.

The index's prevailing downward price structure has shown initial signs of improvement, although a sustained breakout above the broader declining trendline is yet to be confirmed. The relative strength index (RSI) has strengthened to 61.03, moving above the neutral 50 mark and its signal average. This indicates improving bullish momentum without the index entering overbought territory. Meanwhile, the moving average convergence divergence (MACD) has registered a bullish crossover, with an expanding positive histogram pointing to strengthening upward momentum, although the MACD line remains below the zero line.

The Nifty's recovery above its 50-day moving average (50-DMA) signals renewed buying interest and improving near-term sentiment. However, sustained buying will be crucial to confirm further gains. On the upside, the 23,600-23,700 range is likely to act as a key resistance zone, where selling pressure could emerge. On the downside, the 23,200-23,000 range is expected to provide immediate support and will be important in determining whether the ongoing recovery can be sustained.

How did the Nifty Bank perform? Bank Nifty began the week on a firm note, opening higher at 54,837.20 before absorbing early selling pressure to hit an intraday low of 54,582.00. The index subsequently recovered steadily to touch a high of 55,046.35 and closed at 55,002.20, up 315.25 points, or 0.58%, near the day's high. The recovery suggests that buyers are stepping in at lower levels. The index also closed just above its 21-day moving average (DMA).

State-owned lenders led the gains, with Bank of Baroda (+2.75%), State Bank of India (+2.61%) and HDFC Bank (+1.04%) among the major gainers. However, losses in private-sector lenders, including ICICI Bank (-0.76%), Kotak Mahindra Bank (-0.70%) and Axis Bank (-0.66%), capped the upside. The formation of successive lows near 53,700-53,800 in late September and late October also points to a potential double-bottom formation.

Momentum indicators are increasingly favouring the bulls. The 14-period relative strength index (RSI) has climbed to 48.46, above its average of 44.67, and is approaching the key 50 mark, suggesting that selling pressure is easing. The moving average convergence divergence (MACD) line, at -320.39, has crossed above its signal line at -367.06, while the histogram has turned positive at 46.67. This bullish crossover indicates improving momentum, although both the MACD line and the index remain below their respective key trend thresholds, suggesting that the recovery is still at an early stage.

A sustained move by the RSI above 50 and the MACD towards the zero line would provide stronger confirmation of a trend reversal. Until then, the current move is best viewed as a rebound within a corrective structure rather than a confirmed change in trend. On the technical front, the 21-DMA at 54,920 is the immediate support, followed by Monday's low of 54,580 and the crucial 53,700-53,800 zone. On the upside, the 50-DMA near 55,900 is the first major resistance, followed by the 56,680-56,700 range, where the 100-DMA and 200-DMA converge, creating a stronger resistance zone.

The broader macroeconomic backdrop remains mixed. Higher policy rates could support margins for lenders with floating-rate loan books, while strong second-quarter earnings provide additional comfort. However, Brent crude prices near $110 a barrel and continued foreign investor selling remain potential headwinds for market sentiment. We expect Bank Nifty to gradually move towards 55,900, with a buy-on-dips approach favoured as long as the index holds above immediate support.

A closing break below 54,580, however, would weaken the near-term technical setup. 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. Sebi Registration No.: INH000015543