Stock recommendations for 22 October from MarketSmith India

Indian equities gave up a strong opening and ended lower on Wednesday, the first session after the Dussehra holiday, as heavy selling in midcap and smallcap stocks overshadowed IT gains. Nifty 50 fell 77.60 points, or 0.34%, to close at 22,811.35, after rising to 23,120.90 in early trade, while Sensex slipped 143.21 points, or 0.19%, to settle at 73,709.69.

Sentiment was upbeat at the open as positive global cues and the launch of the Jio Platforms IPO, expected to be India's largest, encouraged buying. However, investors booked profits at higher levels, while Brent crude remained above $110 per barrel amid tensions around the Strait of Hormuz, keeping market sentiment cautious.

The broader market bore the brunt, with Nifty Smallcap 100 falling about 2.5% and the midcap index declining nearly 2%. IT was the biggest gainer, gaining about 2%, led by Infosys, Tech Mahindra, TCS, and HCL Tech. Bajaj Finance, Eternal, Eicher Motors, Nestle, and Trent were among the biggest losers, while Autos, Chemicals, and Financials also weighed. Breadth was deeply negative, with 608 stocks advancing, 2,988 stocks declining, and 102 remaining unchanged. Investors will track the Jio IPO subscription and quarterly earnings.

Two stock recommendations by MarketSmith India

Buy: Hexaware Technologies Limited (current price: ₹600)

• Why it’s recommended: Strong AI-first and cloud transformation focus, backed by proprietary platforms such as Amaze®, RapidX™, and Tensai®, is driving enterprise modernization demand and accelerating client adoption. Expanding the digital, data & AI business with growing revenue contribution from AI-led engagements and continued client wins supports long-term revenue growth.
• Key metrics: P/E: 24.78, 52-week high: ₹807.75, volume: ₹161.55 crore
• Technical analysis: Trendline Breakout
• Risk factors: High dependence on global IT spending cycles means macroeconomic slowdowns or delays in technology investments can impact growth and deal ramp-ups. Client concentration, intense competition, talent retention challenges, and pricing pressure may adversely affect margins and profitability.
• Buy: ₹594–603
• Target price: ₹700 in two to three months
• Stop loss: ₹569

Buy: Tata Consultancy Services Limited (current price: ₹2,529)

• Why it’s recommended: Leadership in enterprise AI, cloud, data analytics, and large-scale digital transformation positions TCS to benefit from rising global technology and AI spending. Strong deal pipeline, large order book, diversified client base, and deep relationships across BFSI and other verticals provide sustained revenue visibility.
• Key metrics: P/E: 16.21, 52-week high: ₹3,350.00, volume: ₹1,435.21 crore
• Technical analysis: Reclaimed 200 DMA
• Risk factors: Slowdown in discretionary IT spending, especially in key sectors such as BFSI and North America, can affect revenue growth and deal conversions. Wage inflation, employee attrition, currency fluctuations, and intense global competition can pressure operating margins.
• Buy at: ₹2,504–2,542
• Target price: ₹2,790 in two to three months
• Stop loss: ₹2,400

How did Nifty 50 perform on 21 October?

Indian equity markets ended Wednesday's session on a weak note, with Nifty 50 declining 77.60 points (0.34%) to 22,811.35, reflecting persistent selling pressure across most sectors. The benchmark opened higher at 23,016 and touched an intraday high of 23,120.90 before reversing sharply to a low of 22,649.90. Although the index remained below its previous closing level of 22,888.95, a modest recovery toward the close helped limit losses.

Sectoral performance was predominantly negative, with Consumer Durables (-1.86%), Metals (-1.71%), Auto (-1.54%), and Realty (-1.25%) leading the declines. In contrast, Nifty IT surged 2.88%, providing a notable defensive cushion.

Broader market sentiment remained extremely weak, with 608 stocks advancing, 2,988 stocks declining, and 102 remaining unchanged. This translates into an advance-decline ratio of approximately 1:4.91. Sensex also ended lower, shedding around 143 points (0.19%) to 73,709.69. Elevated crude oil prices, geopolitical uncertainty, and cautious sentiment amid corporate earnings added to volatility.

Nifty 50 ended the session at 22,811.35, declining 77.60 points (-0.34%), forming a bearish daily candle with a long lower shadow, reflecting selling pressure at higher levels despite some intraday recovery. The index continues to exhibit a broader bearish trend, trading below its key short-, medium-, and long-term moving averages, while the downward-sloping trend structure indicates persistent weakness.

The recent recovery from lower levels appears to be a counter-trend rebound rather than a confirmed trend reversal, particularly as the index failed to sustain its early gains. The relative strength index (RSI) stands at 46.27, remaining below the neutral 50 mark, suggesting momentum has improved from oversold conditions but lacks convincing bullish strength. Meanwhile, the MACD has registered a bullish crossover, with a positive histogram indicating improving short-term momentum.

Nifty 50 exhibits a bearish bias, although its ability to sustain above the 21-DMA provides some near-term stability. Technically, 22,700–22,600 remains a crucial support area, and a decisive breakdown below this range could intensify selling pressure, potentially extending the decline towards 22,200–22,000. On the upside, 23,000–23,200 is expected to act as key resistance, after the recent breakdown.

How did Nifty Bank perform?

Nifty Bank opened on a positive note after the Dussehra holiday, helped by firm global cues. Profit booking set in after it tested the intraday high, and the index closed lower for the second straight session. The index opened at 55,707.85, touched a high of 55,867.45, a low of 54,696.45, and closed at 54,976.90, down 511.20 points (-0.92%). It formed a long bearish candle and slipped below the 21-SMA, though the lower shadow shows some buying near 54,700.

Among heavyweights, ICICI Bank (+0.29%) was the only gainer, while Union Bank (+0.72%), and PNB (+0.49%) also ended higher. Axis Bank (-2.10%), SBIN (-1.10%), and Kotak Bank (-1.02%) were the biggest losers, and Yes Bank (-2.78%) was the weakest stock in the index.

The RSI is at 43.51 after turning lower from near 52 and slipping back below the 50 midline, indicates momentum moving in favor of the bears. It is still slightly above its signal average of 42.83, so the downturn is not yet decisive. The MACD line at -258.91 stays above the signal line at -378.44, so the earlier bullish crossover is intact. But both lines are below zero, and the histogram (+119.54) has started to flatten, which means upward momentum is fading. The index trades below its 21-, 50-, 100-, and 200-SMAs, and the 50-SMA has slipped below both the 100- and 200-SMAs. That confirms a weak medium-term trend, so rallies are likely to meet selling.

On the downside, immediate support is at 54,700 (the day's low), followed by 54,000–53,900 (the early-October swing low). A break below this zone could take the index toward 53,500. On the upside, 55,265 (the 21-SMA) is the first hurdle, followed by selling pressure in 55,800–56,000. 56,380–56,890, where the 50-, 100-, and 200-SMAs sit close together, remains a major barrier. Axis Bank's Q2 earnings miss is still weighing on private lenders, foreign investors keep selling, and India VIX is higher, so the bias stays cautious. We expect a range-bound to mildly negative trade, and only a sustained close above 56,000 would bring back bullish momentum.

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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