We are betting on these top 5 portfolio stocks, should you?

We  advise investors to buy business which are run in a capital efficient way and possess sustainable growth prospects.

 

We feel with the worst behind us in the banking space, pick-up in industrial activity and upbeat farm sentiment, one can expect over 20 percent earnings growth over FY18-20e.

He advises investors to buy business which are run in a capital efficient way and possess sustainable growth prospects. We are  positive on Grindwell Norton, Heidelberg Cement, ITC, Sterlite Technologies and Sun Pharmaceutical Industries.

We remain constructive on Indian equities going forward. We essentially derive our confidence from the pick-up in industrial activity and robust consumer demand aided by strong rural growth, which has now begun to reflect in Q1 FY19 earnings. Leading indicators - cement volume growth, tendering activity etc - also points to a marked improvement in capex outlook. There is no alternative (TINA) factor remains for equities as physical assets remain unattractive and monthly flows into equities continue, thereby keeping the underlying strength intact.

The rupee may continue to track emerging market currency complex, which currently is fragile. EM weakness is currently idiosyncratic (Turkish lira declined on the back of political chaos, Brazilian real on upcoming elections and Russian ruble and Chinese yuan due to trade war escalations), but has the risk of becoming systemic. As these economies constitute a major pie of the EM asset basket, a more systemic decline in their currency may put pressure on the Indian currency as well. On the positive side, the pace of INR decline may be tepid as debt market yields have turned positive after adjusting for hedging cost (first time since 2013), which has tapered the sharp pace of debt outflows seen from April to June. The Reserve Bank of India has been selling dollar in the spot market and closing forward long dollar positions. It has preemptively initiated two interest rate hikes which could help contain narrowing yield spread between India and the US.

US and China are now actively engaged in several rounds of tit-for-tat tariffs retaliations. This current tariff war is far away from a full blown trade war. If it happens, it could have a much larger impact on global trade. Despite ongoing negotiations, if China retaliates against the recent US proposal of imposing 10 percent tariff on imports worth $200 billion, then there is scope of a currency war escalation in EM. India’s external trade constitute about 28 percent of GDP (lower than most emerging markets) making its growth more of a domestic consumption story. So, unless there is a full blown trade war, the Indian economy is not at risk of losing growth momentum. Easing of US trade discord with Europe and North American Free Trade Agreement members shows that the US administration is willing to negotiate on reasonable terms and may ebb escalating trade war rhetoric.

Sensex companies (excluding the banking space) reported stellar operational performance in Q1 FY19, driven by robust consumer demand and low base due to transition period before implementation of the Goods & Service Tax. Net sales was up 24.2 percent. This coupled with an improvement in earnings before interest, tax, depreciation and amortisation (EBITDA) margin led to a 27 percent growth in operating profit.

Profit after tax was up 15.7 percent year-on-year. Asset quality concerns at public sector banks (PSBs) seems to be fading away with Q1 FY19 being the first quarter witnessing sequential decline in gross and net non-performing assets. On the consumption front, double-digit volume growth in automobiles (about 19 percent) and FMCG (around 12 percent) space was also encouraging, thereby depicting overall demand recovery. With the worst behind us in the banking space, pick-up in industrial activity and upbeat farm sentiment, we are eyeing a heathy over 20 percent earnings growth over FY18-20e.

By FY19-end, the focus would then shift to general elections, which could lead to volatility as investors prefer a stable regime. Global news flows would keep the market volatile going ahead. Underlying macroeconomic growth, coupled with corporate earnings growth momentum, is likely to be a key catalyst for market movement.

Mutual Fund flows are a combination of systematic investor plan flows and lump sum flows. SIP flows are more structural and sticky in nature as opposed to lump sum flows, since these are primarily received from retail investors, while lump sum inflows are more volatile in nature. In recent months, lump sum investments have slowed down significantly. The combined net inflows into equity and equity-oriented funds have dropped from a monthly average of around Rs 21,500 crore in FY18 to about Rs 14,000 crore in FY19 (till July). It is important to note that during this time SIP flows have actually increased from a monthly average of around Rs 5,600 crore in FY18 while in July (Rs 7,554 crore) there were at an all-time high. We do not expect these structural SIP flows to slow down substantially. Lump sum flows, however, may continue to remain volatile on broader market environment and sentiment.

Top five bets that should be a part of investors' portfolio?

Grindwell Norton

Grindwell Norton (GNL) reported a robust Q1FY19 wherein revenues, EBITDA and PAT grew 12.5 percent, 33.5 percent and 45.1 percent, respectively. This was mostly on account of strong growth of 12.5 percent YoY and 29.4 percent YoY in the ceramics and others segment, respectively. These segments also reported strong EBIT margins of 17.1 percent and 24.5 percent, respectively. Going forward, we expect all three segments, abrasives, ceramics and others to grow at a healthy rate of 11.2 percent, 17 percent and 23.5 percent CAGR, respectively, in FY18-20E. Accordingly, we expect GNL to post healthy topline, EBITDA and bottomline growth of 15.1 percent, 13.1 percent and 13.8 percent, respectively, in FY18-20E. Additionally, with a cash balance of Rs 272 crore and debt-free status, we believe GNL is a quality play.

Heidelberg Cement

In Q1FY19, the company reported strong volume growth of 15.0 percent and EBITDA/t in excess of Rs 900/t, indicating a robust improvement in industry dynamics in the company’s area of operation. Going forward, a pick-up in construction activity, better sand availability, normal monsoons and a hike in minimum support prices is expected to keep demand healthy. In addition, operating leverage benefit and cost efficiency are expected to result in margin expansion of 90 bps to 18.9 percent by FY20E.

ITC

ITC reported a strong set of Q1FY19 numbers wherein revenue, EBITDA & PAT increased 7.6 percent, 12.2 percent and 10.1 percent, respectively. Its cigarette segment volume growth was at ~2 percent. This was a surprise as the respective segment has been de-growing in the last five years. We believe volumes should grow 3 percent in FY19E & FY20E. Given expected stable cigarette volume along with stronger profitability in FMCG business, we expect revenue & earnings to grow at a CAGR of 10 percent & 11.6 percent, respectively

Sterlite Technologies

Sterlite Tech remains a quasi-play on rising data demand globally and subsequent need for deep fiberisation of networks. Being an integrated player, it is poised to reap the superior benefits of operating leverage, already seen over the last couple of quarters. We foresee a robust growth potential ahead, with topline, earnings CAGR of 34.6 percent, 38.1 percent, respectively, in FY18-20E.

Sun Pharma

For Sun Pharma, Q1FY19 results were above estimates despite lower-than-expected Taro sales. Going ahead, focus on specialty products in the US is the culmination of the management’s endeavour for a shift from generics in the backdrop of US headwinds. The management has reiterated double digit growth guidance for FY19 with a slew of specialty launches besides Halol decongestion.

MORE WILL UPDATE SOON!!

Brokerages initiate coverage on these 9 smallcaps in August, may return 40% in 1 year

With markets hitting fresh highs, most experts said there is need for a portfolio rejig and investors should add stocks that are showing growth.

The Nifty hit the 11,700 mark this week. Despite expectations that the current bull run is here to stay, experts said investors should be cautious in what they buy. With markets hitting fresh highs, most experts said there is need for a portfolio rejig and investors should add stocks that are showing growth.

  

At a time when markets are trading at record highs, one can invest 40 percent of their portfolio in bonds, 30 percent in largecaps, 15 percent in smallcaps and 15 percent in midcaps for appropriate diversification.We sees sectors such as state-run banks, pharmaceuticals, cement, realty and oil marketing companies are likely to hog the limelight in the medium term.

After the June quarter results, Sensex constituents are expected to report a 20-22 percent compounded annual growth rate over FY18-20. Healthy growth is contingent on the easing of asset quality issues for corporate lenders and normalisation of earnings.

Given the recent recoveries, management commentary and record valuation gap between the private sector, retail banks and corporate lenders, brokerage Sharekhan says it might be a good idea to start nibbling on some quality corporate banks with an 18-24 month investment horizon. “We would suggest exploring opportunities in the industrial and quality midcap space now. We remain constructive on consumption, retail, and IT sectors.

Here is a list of top 10 companies where brokerages have initiated coverage in August. These stocks can return up to 40 percent in the next 12 months from their August 24 closing price:

NIIT: Buy| LTP: 96| Target: Rs 138| Return 43%

Elara Capital initiates coverage on NIIT Ltd on August 14 with a buy recommendation and a target price of Rs 138 which translates into an upside of 43 percent.

NIIT (NIIT IN) has transformed its revenue profile from an India-centric, retail-oriented IT training business to an exports-oriented, asset-light B2B training outsourcing business over FY10-18.

Revenue volatility has been reduced by adding large, multi-year structured deals from international marquee corporate customers. Over FY15-18, the retail training business has also been revamped and repositioned to focus just on India & China and shorter duration programs, such as digital marketing.

The brokerage firm expects visible revenue growth for NIIT starting in FY19. Given strong Order book for CLG and visibility into FY20 with the contract with the Real Estate Council of Ontario (RECO), Elara expects revenue growth for NIIT to continue into FY20 and beyond.

Amber Enterprises Ltd: Buy| LTP: Rs 942.40| Target: Rs 1145| Return 21%

Kotak Securities initiated coverage on Amber Enterprises on August 10 with a buy recommendation and a target price of Rs 1,145.

Amber Enterprises (AEL) is the leading OEM/ODM for several room AC (RAC) brands in India, with a 55.4 percent market share. Being the market leader, Kotak Securities sees Amber as a significant beneficiary, thanks to a) its established relationship with 8 out of top 10 RAC companies, b) high level of backward integration, c) scale of manufacturing and testing facilities & d) impressive R&D capabilities.

Given the strong demand dynamics of room AC industry, it expects AEL to post consolidated sales/PAT CAGR of 22%/53% over FY18-FY20E. AEL is a good play on India’s growing OEM/ODM RAC market.

V-Mart Retail Ltd: Buy| LTP: Rs 3011| Target: Rs 3316| Return 10%

Elara Capital initiates coverage on V-Mart Retail for the first time on August 6 with a buy rating and a target price of Rs 3,316.

V-Mart Retail (VMART IN) has built its business model around value retailing in emerging India where there is still a huge gap between aspirational growth and organized retail presence. VMART has based its stores to cater to the “under-consumed” India, extending across Tier II, III & IV cities and towns.

Despite expanding its store base from 22 to 171 at a CAGR of 23 percent and retaining a sales CAGR of 29 percent over FY08-18, the company has kept a debt-free balance sheet, maintained high operating profitability (10%+) & high ROCE (34%), and generated free cash flow (INR 701mn in the past four years).

Sheela Foam Ltd: Buy| LTP: Rs 1622.90| Target: Rs 1744| Return 7.5%

ICICI Securities Ltd initiates coverage on Sheela Foam with a buy rating on July 30 with a target price of Rs 1744. Sheela Foam (SFoam) is the leader in the organised mattress market in India with a 23 percent market share in terms of value.

“We believe the company is best positioned to capture the opportunity being unlocked from the largely unorganised market, the macro-triggers being: 1) shift of preference from the cotton mattress to non-cotton mattress, 2) rising income levels, and 3) low penetration.

SFoam’s revenue has grown at CAGR of 11.3 percent between FY13-FY18, and ICICI Securities expects the revenue growth CAGR of 15.1 percent over FY18-21E aided by a confluence of gradual shift of customer preference toward the non-cotton mattress segment and SFoam’s strategy of: 1) premiumising and sub-segmenting, 2) expansion of distribution network, 3) outsourcing of some products, 4) higher focus on branding, and 5) product customization.

Jyothy Laboratories Ltd: Buy| LTP: Rs 201| Target: Rs 270| Return 34%

Ventura initiated coverage on Jyothy Laboratories for the first time on August 13 with a buy recommendation and a target price of Rs 270.

Post the acquisition, Jyothy Laboratories Ltd (JLL) has demonstrated impeccable growth with Revenues, EBITDA & PAT witnessing 10.9%, 21.3%, and 29.2% CAGR growth respectively.

Along with strong performance, debt has seen a substantial reduction with return ratios climbing. The market too has re-rated the stock reflected in the buoyant prices. While the stock is not cheap, the brokerage firm, still believes that going forth the robust growth should continue.

Elgi Equipment Ltd: Buy| LTP: Rs 289.70| Target: Rs 350| Return 21%

We initiates coverage on Elgi Equipment for the first time on August 17 with a buy recommendation for a target price of Rs 350. Elgi Equipments (Elgi) manufactures a complete range of compressed air solutions including a wide range of air compressors.

Globally, it is the eighth largest player commanding ~1.3 percent market share. Its manufacturing facilities are spread across India, Europe & America. Air compressors, automotive equipment contributed 88.1%, 11.9%, respectively in FY18.

With a profitable turnaround of foreign subsidiaries like Rotair in Italy, Patton’s in US, coupled with signs of growth revival in Indian operations, Elgi is in a sweet spot for solid business performance in the next couple of years.

The global brokerage firm expects Elgi to report revenue CAGR of 18 percent and a PAT CAGR of 28.7 percent in FY18-20E.

Westlife Development: Buy| LTP: 391| Target: Rs 485| Return 24%

Nirmal Bank re-initiates coverage on Westlife Development on August 24 with a buy rating and a target price of Rs 485. Westlife Development (WLDL) through its 100% subsidiary, Hardcastle Restaurants Pvt. Ltd, owns and operates a chain of McDonald’s restaurants in west and south India, being a master franchisee of McDonald’s Corporation, USA.

The management’s focus on the value-for-money proposition, menu innovation and efforts in improving consumer experience have helped the brand to sail through a challenging environment in the past.

‘Burger Plus’ is the differentiating factor for WLDL and has really helped in recruiting new consumers and driving frequency of eating out. The brokerage firm believes that Quick Service Restaurant (QSR) sector in India is at an inflection point and WLDL is set to grow well ahead of the market on account of company-led initiatives. It expects the revenue/EBITDA/PAT to post a three-year CAGR of 22%/54%/99%, respectively, over FY18-FY21E.

TTK Prestige Ltd: Buy| LTP: Rs 6408| Target: Rs 7500| Return 17%

Angel Broking Ltd initiates coverage on TTK Prestige on August 17 with a buy recommendation and a target price of Rs 7500.

TTK Prestige (TTK) is the leading brands in kitchen appliances with 40 percent+ market share in the organized market. It has evolved from being a single product company to a multi-product company offering an entire gamut of the kitchen and home appliances (600+ products).

It expects to double its revenue in the next 5 years backed by a revival in consumption demand, new 5 cr LPG connections under the Ujjawala Scheme, inorganic expansion and traction in exports.

Aditya Birla Fashion: Buy| LTP: Rs 201| Target: Rs 220| Return 10%

Kotak Institutional Equities initiates coverage on Aditya Birla Fashion on August 23 with a buy recommendation and a target price of Rs 220, based on June 2020E EV/EBITDA of 20x for Madura and EV/EBITDA of 17x for Pantaloons.

Madura is a steady growth and strong FCF generating business, while Pantaloons turnaround can provide a strong margin kicker. We forecast healthy revenue/PBT CAGR of 16/124% over

FY2018-21 driving a reduction in leverage and improvement in return ratios.

Dixon Technologies Ltd: Buy| LTP: Rs 2585| Target: Rs 3285| Return 27%

Nirmal Bang initiates coverage on Dixon Technologies for the first time on August 21 with a buy recommendation and a target price of Rs 3285.

Dixon Technologies (India) or DTIL is the second-largest EMS (electronic manufacturing services) player in India with a market share of 9.3 percent. The EMS industry in India offers robust growth prospects, of which DTIL will be a major beneficiary.

Over the past few quarters, DTIL has been investing in backward integration and capacity expansion across product categories to improve its value offerings, which has led to increased costs and lower-than-expected profitability.

However, the exercise is nearing completion in 2QFY19, a post which DTIL is likely to reap immense benefits. DTIL posted industry-leading revenue CAGR of 30 percent over the past five years.

With multiple growths and margin levers in place, we expect DTIL to register 19%/31% revenue/PAT CAGR, respectively, over FY18-FY21E. We initiate coverage on DTIL with a Buy rating and a target price of Rs 3,285 based on 35x FY20E earnings, assigning it 1.1x PEG ratio and a 10% discount to branded peers.

MORE WILL UPDATE SOON!!

Stock picks of the day: Put writing at 11,600-11,700 strike price will limit downside for August expiry

The Nifty has been maintaining a bullish setup with higher tops and higher bottoms. However, Oscillators have been gradually losing strength on the short-term charts.

 

The Nifty has been registering new milestones day by day. On Monday, we saw Nifty extending the rally towards the new all-time high of 11,700. The next resistance for Nifty is seen somewhere at 11,768, which happened to be 138.2% Fibonacci extension level of the entire swing seen from 9,952 (March 2018 Low) to 10,929 (May 2018 Top) and from 10,929 to 10,417 (May 2018 Low).

In case 11,768 level is taken out on a closing basis, the next target comes at 161.8% extension levels, placed at 11,999. As far as support is concerned, it has now shifted upwards towards 11,532. This can be kept as a stop loss in trading long positions.

The Nifty has been maintaining a bullish setup with higher tops and higher bottoms. However, Oscillators have been gradually losing strength on the short-term charts.

RSI indicator has reached in an overbought zone not only on daily but also on the weekly and monthly chart of Nifty. There has been some negative divergence on the daily charts.

MACD indicator has been sustaining below its signal line. It is always believed that bearish trend reversal confirms only if price violates the support, which is not the case with Nifty as of yet.

Bank Nifty Index has managed to hold above the previous bottom of 27,739 on the daily charts, to close at 28264. The Bank Nifty registered an all-time high at 28,378 on 10th Aug 2018 and saw a fall afterward towards 27,739.

On 23rd August, Nifty made a lower top at 28,325 and again turned southward. Fresh breakout on the daily chart will be confirmed only if BankNifty surpasses the previous top resistance of 28,325.

That will also result into surpassing the resistance of 61.8% Fibonacci extension levels. Once 61.8% extension is taken out next target comes at 100% extension, which is placed at 29,600 levels in BankNifty. Longs should be held with the Stop Loss of 27,739.

The Nifty500 index has registered a new all-time high at 9967 levels during Monday’ session, while the Nifty Midcap index has managed to sustain above its 200-DMA after three months.

This indicates that gradually market breadth is improving. However, small-cap stocks have not been able to find their feet along with the benchmark index’s bullish momentum. As far as other sectors are concerned we like Pharma, IT and Metal space for the short to medium term.

From the derivative perspective, PUT writing is seen at 11600-11700 strike price, which limits the downside atleast till the August expiry.

FIIs have remained net buyers in stock futures, which indicate that stock-specific bullishness would likely to be there. Put Call ratio has also been moving up to 1.81, which can be interpreted as an overbought condition in the markets. However, In January 2018, we, saw Put call ratio reaching as high as 1.91.

Considering the technical evidence discussed above, we believe that, the Positional trend of the Nifty is bullish. Holding Nifty with the trailing stop loss would be the right strategy for the short term.

In the present scenario, stop loss can be kept at 11532, while resistances are seen at 11,768 and 11,999.

Here is a list of top three stocks which could give 8-10% return in the next 1 month:

Axis Bank Ltd: Buy| LTP: Rs 650 | Target: Rs.700 | Stop-Loss: Rs 620 | Return 8%

The stock is on the verge of registering a new all-time high above Rs 655, which was registered in March 2015. The stock price has broken out from symmetrical Triangle on the monthly charts, indicating a continuation of an uptrend.

The stock price has also broken out from the downward sloping trend line, adjoining the previous two monthly tops. There is a breakout from the consolidation, which held for the last 14 quarters.

Volumes have been rising along with the price rise for the last three months. The stock price has been trading above 20, 50, 100 and 200-DMA.

Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of Rs 700 and keeping a stop loss below Rs 620 on a closing basis.

PNB Housing Finance: Buy| LTP: Rs 1412 | Target: Rs. 1550| Stop-Loss: Rs 1330| Return 10%

The stock price has broken out from descending Triangle on the weekly charts, indicating a continuation of an uptrend.

The stock price has also broken out from the bullish flag pattern on the daily charts. There is a breakout from consolidation, which held for the last four weeks.

Volumes have been rising along with the price rise for the last two sessions. The stock price has been trading above 20, 50 and 200-DMA.

Indicators like MACD and ADX have turned bullish on the daily and weekly charts. Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of Rs 1,550 and keep a stop loss placed below Rs 1,330 on a closing basis.

Piramal Enterprise Ltd: Buy| LTP: Rs 3060 | Target: Rs. 3200 | Stop-Loss: Rs 3025| Return 9%

The stock price has registered a new all-time high at Rs 3,075. Previous all-time high was formed at Rs 3070 in June 2017. The stock price has broken out from “Flag” pattern breakout on the monthly chart, which indicates the resume of a primary uptrend.

On Monday, the stock moved up more than 6 percent with a significant jump in volumes. The Nifty Pharma Index is looking extremely strong on the short to medium-term charts.

Indicators like MACD and ADX have turned bullish on the weekly charts. Considering the technical evidence discussed above, we recommend buying the stock at CMP for the target of 302 and keeping a stop loss placed below Rs 250 on a closing basis.

MORE WILL UPDATE SOON!!

Our latest newly added stock under research coverage is Elgi Equipments-IndianMarketPulse

About the Company:

Elgi Equipments (Elgi) manufactures a complete range of compressed air solutions including a wide range of air compressors.

It is the second largest Indian player (~22%) only behind global market leader Atlas Copco

Globally, it is the eighth largest player commanding ~1.3% market share. Its manufacturing facilities are spread across India, Europe & America.

Investment Rationale:

Indian manufacturing cycle uptick to strongly benefit Elgi: India's compressor market is pegged at ~4,000 crore, implying a 4% share of the global air compressor market. Elgi has a domestic market share of 22.3%, second to Atlas Copco India (~33%). India & exports contributed 894.5 crore (~55.7%) to the total consolidated topline reporting steady growth of 12.6% YoY.

Sustained turnaround in foreign subsidiaries remains key - Elgi has several foreign subsidiaries in key markets like the US and Europe. Faced with stiff competition and continued losses, Elgi scaled down its operations and rationalised costs in markets like China. Revenues from foreign subsidiaries were at 519 crore, 26% up in FY18 contributing to a consolidated revenue of 32.3%. Going ahead, the company continues to fortify the marketing and distribution of its foreign arm.

Aspiring market leader with solid fundamentals - Elgi aims to fortify its frontend i.e. strengthen marketing & distribution to leverage its strong product profile. We believe its leadership position, superior product profile, profitable growth in foreign subsidiaries, lower debt and efficient working capital cycle place it in a sweet spot.

Key Financials:

MORE WILL UPDATE SOON!!

A close above 11,620 in the coming week will lay the foundation for Mount 12K on Nifty

New highs can be a far cry for mid and small cap indices in the near future but at least we can see a decent up move in this space as they try to catch up with the broader markets.

  

While the Indian market closed the truncated week on a positive note with gains of about 1%, but  vertical move needs to be corrected.

If Nifty closes above 11,620-levels we may head towards the zone of 11,800–12,000

At this point in time technical set up is looking somewhat weak as the market has almost rallied in one way for the last 8 weeks from the lows of 10,550. This vertical move needs to be corrected as it can’t continue in a unidirectional manner.

The price action of the current week depicted a ‘Shooting Star’ kind of formation on the weekly candlestick charts.

Hence, next week if we consistently trade below 11,499 levels then there is a bright chance that we can form a short-term top at 11,620 and then head towards 11,340 on the downside.

To negate this bearish formation, Nifty need to close above 11,620 levels. On such a close, we may head towards the zone of 11,800 – 12,000. But, in our opinion, traders will get a compelling opportunity to trade only after a correction.

How are Bank Nifty charts looking like?

Weakness is getting more pronounced in Bank Nifty as bearish patterns are more clearly visible in this index.

There seems to be almost a ‘Double Top’ kind of formation in this index as recent high of 28,325 is a tad bit lower than lifetime highs of 28,377 from where it appears to have resumed its downtrend.

A retest of recent low of 27,739 looks inevitable and a decisive close below 27,739 shall lead to the test of its 50-day EMA whose value is around 27,273 as on Friday’s close.

Yes, market breadth has significantly improved in recent rallies. But, still, Nifty500 index is yet to make a decisive breakout above its January 2018 highs of 9,895.

Just on last Thursday, the said index has made new highs as it hit 9,900 by marginally getting past January 2018 high of 9,895 but it failed to build on the rally further.

A sustainable up move above 9,900 can significantly strengthen the sentiment in broader markets and can give a much-needed fillip to the mid and small-cap space which remained significant underperformers.

New highs can be a far cry for mid and small cap indices in the near future but at least we can see a decent up move in this space as they try to catch up with the broader markets.

RUPEE

In the past, 69 acted as a floor for INR as it took support in the zone of 68.80 – 68.90 on multiple occasions between the year 2013-2016. Now, that floor appears to have caved in paving the way for more weakness.

If Rs 70.50/USD is breached then based on long-term charts we have a target placed around Rs 72.50/USD. Unless INR settles below 68.89 vis-a-vis USD, the uptrend is unlikely to kick in. For some time it may remain range bound between the levels of Rs 69.40-70.50 per USD levels.

Here is a list of top three stocks which could give good returns.

Zee Entertainment: Buy| LTP: Rs 509.10| Target: Rs 540| Stop Loss: Rs 490| Return 6%

On multiple occasions, this counter bounced back from the lows of Rs 490 or so. Hence, there seems to be a trading opportunity in this counter as it smartly recoiled from the intraday lows of Rs 500 which was in line with its past behaviour.

Hence, positional traders are advised to buy into this counter with a stop below Rs 490 on a closing basis for a target of Rs 540.

Bajaj Electricals: Buy| LTP: Rs 564| Target: Rs 603| Stop Loss: Rs 535| Return 7%

After retracing around 80 percent of its strong rally from the recent lows of 520 – 627 this counter appears to have posted a bottom around 538 levels and resumed its upmove.

Hence, sustaining above this level it can head to test its gap present in the zone of Rs 581 – 603. Hence, positional traders should buy into this counter for a target of Rs 603 and a stop below Rs 535 on a closing basis.

Eicher Motors: Buy| LTP: Rs 28,796| Target: Rs 30,080| Stop Loss: Rs 28,350| Return 4%

At hitting a recent low of 28,076 this counter appears to have retraced 50 percent of its last leg of the rally from the lows of 26,601 – 29,470 levels.

Last three days of price action is suggesting that it is now positioning itself for a fresh leg of an upswing. In that scenario, it can ideally head towards 30,080 levels.

Hence, positional traders are advised to buy into this counter for a target of Rs 30,080 with a stop below Rs 28,350 on a closing basis.

MORE WILL UPDATE SOON!!

While Nifty jumped from 11,000 to 11,600 in past 7 months, these 10 NSE stocks rallied 50-180%

The Nifty 50 has taken 144 trading sessions or exact seven months to hit 11,600-mark on August 23 from first 11,000 in January 23, 2018.

2018 has been a roller coaster ride for the market. After the correction seen in February and March, everyone was taken by surprise when Nifty 50  again retested 11,000 in July. The index has jumped more than 600 points to cross 11,600-mark in the recent rally.

It had hit 11,000 for the first time on January 23, 2018.

The last record high was 11,171 on Janauary 29 followed by sharp correction till March 23 which dragged the index to 9,998.05 on closing basis. The index started recovery from last week of March but that was gradual with consolidation. The actual pace of growth increased in July and is still continuing in August.

The up move in the market has been seen despite the headwinds like US-China trade war tensions, currency war driven by Turkish lira, higher current account deficit (CAD) led by rising crude oil prices.

The drivers that are helping Sensex and Nifty hit record highs are in-line or better-than-expected Q1FY19 earnings, mormal monsoons, stabilisation after demonetisation, easing out of worries around distribution issues and GST and increase in MSP (minimum Support prices).

The government's winning of no confidence motion in the Parliament also boosted the sentiment.

Experts say the rally may continue with intermittent correction, which is part of bull run, going forward.

We have a positive view on the markets due to strong upsurge in rural demand and benefits of GST. BJP's performance in state elections will be a major determinant given anti-incumbency factor and repeated attempts of opposition to cobble up a working alliance.

The rally in the past month or so has been driven by select stocks and has not been broad-based. This is worrisome because sectors like metals, pharma, PSU oil & gas, auto, select infra and major banks did not participate.

Prabhudas Lilladher said the markets are ignoring emerging headwinds like 1) Likely increase in inflation led by higher MSP 2) cautious RBI stance on inflation by 25 bps increase in repo rates 3) escalation of trade wars between US and China and 4) impact on CAD/ currency led by rising crude (imports up 51 percent YTD).

Top 10 counters that contributed to the index rally were Reliance Industries, Hindustan Unilever, TCS, Bajaj Finance, Bajaj Finserv, M&M, Tech Mahindra, Asian Paints, Infosys and Kotak Mahindra Bank, which rallied 16-69 percent in the last seven months.

 

Among these stocks, Bajaj Finance, TCS and Reliance Industries hit their fresh intraday record high on August 23.

The major reason behind rally in above stocks was June quarter earnings which were more or less in-line or better-than-expected and also guidance for future earnings growth.

Benchmark index companies (ex-banking space) reported stellar operational performance in Q1FY19 primarily driven by robust consumer demand and low base due to transition period before GST implementation (Q1FY18). With worst behind us in the banking space, pick up in industrial activity and upbeat farm sentiment, we are eyeing over 20 percent earnings growth over FY18-20E.

Top 10 stocks which did not participate in seven-month bull run were Tata Motors, Vedanta, HPCL, BPCL, Bharti Airtel, Tata Steel, IOC, UPL, Bajaj Auto and ONGC which shed 39-17 percent.

On closing basis of both days (January 23-August 23), the Nifty 50 rallied 4.5 percent and from 11,000-11,600 levels, the upside was 5.5 percent, but overall the same performance was not seen in other indices viz Nifty 500 (flat during Jan 23-Aug 23), Nifty Midcap (down 10 percent) and Nifty Smallcap (down 19.5 percent) indices.

On earnings front, Nifty50 companies reported sales growth of 23 percent, adjusted profit growth of 11.5 percent and EBITDA growth of 20 percent margin contracted by 43 basis points in Q1FY19 YoY, but Nifty Midcap companies' performance was completely different. Sales growth was 5 percent, adjusted profit growth of nearly 25 percent, EBITDA 9.5 percent and margin expansion of 60 basis points.

In the period of seven months, only 25 percent companies out of Nifty 500 gained the momentum while the rest was in the red. Of 25 percent stocks, top 10 stocks which participated in the rally were Indiabulls Ventures, Merck, NIIT Technologies, Bajaj Finance, Firstsource Solutions, Larsen & Toubro Infotech, VIP Industries, L&T Technology Services, Page Industries and Mphasis gained 53-183 percent.

 

Undervaluation after correction in February & March, and stable to strong earnings growth caused upmove in above stocks.

Major losers among Nifty 500 stocks were Jaiprakash Power Ventures, Hindustan Construction Company, Jet Airways (India), Reliance Naval, Manpasand Beverages, Kwality, Bombay Rayon Fashions, JBF Industries, PC Jeweller and Vakrangee, which corrected 91-61 percent.

Most of these stocks corrected because of corporate governance and weak earnings performance.

In the Nifty Midcap index, about 70 stocks out of 100 gave negative returns during seven-month period which include Suzlon Energy, Bank of India, NBCC, Indiabulls Real Estate, Union Bank etc.

 

The top 10 biggest gainers apart from Indiabulls Ventures (183 percent upside) were Page Industries, Mphasis, Bata India, Hexaware, Mindtree, Exide, Berger Paints, Jubilant Foodworks and United Breweries which gained between 25 percent and 57 percent, largely driven by earnings and underperformance.

The Smallcap was the second worst performer among all NSE indices (except VIX) because of correction in 80 percent of stocks which include SREI Infrastructure, Rain Industries, Syndicate Bank, Sintex Plastics etc.

Biggest gainers among smallcaps were NIIT Technologies, VIP Industries, Infibeam Avenues, HEG, Tata Elxsi, Graphite India, Bombay Burmah Trading Corporation, Kaveri Seed Company, Lakshmi Machine Works and Cyient which gained 10-73 percent.

MORE WILL UPDATE SOON!!

Technical View: Nifty forms 'Doji' pattern; may be on verge of short term trend reversal

India VIX fell by 3.35 percent to 12.33 levels and overall lower volatility suggests that bulls could support the market on declines.

  

The Nifty 50 snapped four-day winning streak and closed rangebound session on a weak note Friday, forming an indecisive pattern known as 'Doji' on the daily candlestick charts, which also resembles 'Spinning Top' kind of pattern. On the weekly scale, the index formed bullish candle.

A 'Doji' is formed when the index opens and then closes approximately around the same level but remains volatile throughout the day which is indicated by its long shadow on either side. It appears like a cross or a plus sign.

Spinning Top is often regarded as a neutral pattern which suggests indecisiveness on the part of both bulls as well as bears. It can be formed in an uptrend as well as in a downtrend.

The Nifty 50 after opening lower at 11,566.60 managed to claw back immediately to hit an intraday high of 11,604.60, but wiped out gains in the first hour of trade itself to hit day's low of 11,532 and remained range bound for rest of the session. The index closed 25.70 points lower at 11,557.10 while it rallied 0.75 percent during the week.

Albeit Nifty 50 registered a Doji kind of indecisive formation enough sell signals emerged on lower time frame charts, post Friday’s price action, suggesting that the said index may be on the verge of a short term trend reversal.

Hence, selling shall get accelerated if it breaches the 39-day old ascending channel, whose support is placed around 11,532, which is in progress from the lows of 10,550 levels. A decisive breakdown below the said channel shall open up a new target placed around 11,350 levels.

In next trading session a close below 11,498 levels shall confirm the short term down trend there by intensifying the selling pressure further which shall eventually lead to the test of 11,340 levels.

Contrary to this a close above 11,620 shall reinstate the bullish sentiment with initial targets placed around 11,700 levels.It looks prudent on the part of traders to book profits and remain on sidelines till further signs of strength are seen in the markets.

India VIX fell by 3.35 percent to 12.33 levels and overall lower volatility suggests that bulls could support the market on declines.

On the option front, maximum Put OI is moved back 11,000 followed by 11,500 strike while maximum Call OI is at 11,600 then 11,500 strike. Put unwinding was seen at most of the immediate strike price while Call writing was seen at 11,600, 11,650 and 11,750 strikes.

The Nifty has negated its formation of higher highs - higher lows of last four sessions and formed a small Bodied indecisive candle on daily scale however weekly scale still holds its overall bullish setup. It failed to surpass 11,600 zones and witnessed a profit booking-led decline towards 11,532 marks.

He believes overall trend is still intact to positive to rangebound as it has been trading in a rising channel with the support of rising trend line.

Now it has to continue to hold above 11,550 zones to witness an upmove towards 11,635 then 11,666 while on the downside immediate major support is seen at 11,500-11,450 zones.

Bank Nifty remained under pressure for third consecutive trading session and has been underperforming the Nifty index. It has recently failed to surpass its multiple hurdle of 28,333 zones and fell towards 27,782 marks.

"The index formed a Dark Cloud cover on weekly and an early formation of Double top on daily scale which suggests that some more profit booking could be seen if it doesn't surpass immediate hurdle of 28,000 zones.

Now if it sustains below 28,128 zones then more profit booking could be seen towards 27,650 then 27,440 zones.

MORE WILL UPDATE SOON!!

These 49 stocks in NSE 500 hit fresh all-time highs in August. Did you spot them?

Three stocks more than doubled investors’ wealth so far in 2018, which include names like Indiabulls Ventures followed by Merck and NIIT Technologies.

The Nifty rallied from 11,000-levels recorded in the month of January to 11,600 in August, a gain of over 5 percent in just 7 months. Interesting?

Well, there's more. If you have not noticed, there are about 50 stocks in NSE 500 index, which hit a fresh record high in August and outperformed the index in the same period as well.

As many as 49 stocks in the NSE 500 index rose 10-200 percent in 2018 which is higher than 5.4 percent return given by Nifty from January 23 to August 23, 2018.

Stocks which rose to fresh record highs in August include names like Indiabulls Ventures, Merck, NIIT Technologies, HEG, VIP Industries, Jubilant FoodWorks, Bajaj Finance, L&T Infotech, TCS, Godrej Consumer, Avenue Supermarts, and Atul Ltd etc. among others.

Out of these 49, three stocks more than doubled investor wealth so far in 2018, which include names like Indiabulls Ventures which rose 192 percent, followed by Merck which was up 129 percent, and NIIT Technologies which gained 113 percent.

Among the Nifty stocks, TCS, RIL, HUL, Infosys, M&M, Yes Bank, IndusInd Bank, Bajaj Finance and Bajaj Finserv hit fresh lifetime highs along with Nifty which hit a fresh milestone of 11,600 levels.

As many as 72 stocks in the NSE 500 index hit a fresh 52-weeks high which include names like MindTree, Kaveri Seed Company, Dewan Housing Finance, Divi’s Laboratories, Britannia Industries, Bajaj Finserv, Dabur India, HUL, JSW Steel etc. among others.

Future Outlook:

The Nifty continued its record-setting spree as it formed an all-time high of 11,620 on Thursday. The entire up move in the index since July 2018 low (10,604) has been well-channeled signalling sustained demand at elevated levels.

Most experts feel that the up move could extend towards 11,640 and if the momentum continues it could well stretch towards 11,840 but from a one-year perspective, most experts feel that the index could well hit 12,000.

We spoke to some 12 analysts, fund managers, and money managers earlier in the month of August to access the momentum. Almost 67 percent of the poll respondents feel that the S&P BSE Sensex is likely to hover in a range of 40,000-42,000 in the next 12 months.

For Nifty, almost 100 percent of the poll respondents feel that Nifty is on track to hit 12,000 and hover in the range of 12,000-13,000 in the next 12 months.

However, most experts expressed their concerns about falling currency which depreciated to Rs 70.39/USD recently. However, experts feel the current depreciation in currency is largely due to external factors and could well top Rs 71 in the near-term.

We have always believed that there was depreciating bias to INR. However, the recent sharp movement towards 70/USD has been entirely on the account of global tensions, which are highly fickle in nature and uncertain.

The probability of INR going to 71/USD based on global events is as high as its probability of going back to 69/USD. It is too early to incorporate recent movements into our INR forecasting models.

MORE WILL UPDATE SOON!!