Top 9 stocks to buy which could give returns outperforming index in next 2-3 years

we are very positive on private sector banks and Consumption stories in auto, retail, aviation, entertainment, building material and appliances.

  

FY19 is difficult to call because there are too many moving parts. There is the rate tightening cycle in the US, hardening of commodity price, particularly oil and then the “gorilla in the room” – political uncertainty.

As against these negatives, the earnings vibrancy is the key and equally balancing positive. Our assessment is that investments made during this fiscal will yield very good returns and purchases will be at reasonable valuations and not elevated levels what was the case in the second half of 2017-18.

Investors should work with flat to low single digit index returns. Sentiment may get tested because of negatives mentioned above. The year would be a year of consolidation and patience will be tested as also the conviction in equities.

 Private sector retail lenders will continue their stellar performance. They will gain market share at the expense of PSU and then there is the underlying growth momentum.

Top banks like HDFC, IndusInd Bank and Kotak Mahindra Bank can deliver index beating returns over the next 3 years.

Investors with risk appetite could consider Yes Bank, RBL Bank and DCB Bank. Within the NBFC space we like Bajaj Finance and Capital First and its future avatar IDFC Bank.

Although we are very positive on private sector banks and Consumption stories in auto, retail, aviation, entertainment, building material and appliances, spectacular trading bounces may be visible in cyclical commodity businesses, infra construction companies, real estate, chemicals (due to China factors), fertilisers etc. Traders and short term investors could target these sectors.

Your guess is as good as mine, but BJP getting an absolute majority is a far-fetched scenario. Base case scenario is an NDA majority with smaller parties throwing their weight around.

Governance may suffer; but hopefully, the major reforms would have been completed in this term itself, that being GST, NPA resolution and removal of impediments for large infra projects.

 Earnings will come through but PEs will compress which means that there would be sideways consolidation. The base will be formed for another spectacular up move in 2019 post general elections, cooling of commodity prices and completion of rate tightening cycle.

30-35 percent into Banks / NBFCs (private sector and retail focussed), 30-35 percent into consumer oriented stocks (Auto, Retail, Avaition, Entertainment, Building material and appliances), 15 percent in Capital Goods / EPC companies 5 percent in niche exporter / special situation.

Hold Cash at 10 percent at all times to take advantage of extreme volatility which will be the highlight of the next 12-15 months.

MORE WILL UPDATE SOON!!

Nifty is likely to remain volatile ahead of expiry; 3 stocks which could give up to 10% return

Ahead of F&O expiry this week the volatility trade can’t be ruled out. It will be advisable to trade with cautions and follow stock specific opportunities with a tight stop-loss.

  

The Nifty remained volatile throughout the week as the index plunged to a lower level after opening with huge gap-down in Friday’s trading session. Bears continued to remain in the realm as the market absorbed a weak set of global cues especially on US trade tariff coupled with retaliation from China.

Despite Nifty attempted to reclaim the uptrend regime for two sessions, but the overnight event which ignited fears of trade war dragged the index to breach below its psychological level of 10000 and closed with weak sentiment at 9998 levels down by 1.93 percent on weekly basis.

The index formed a strong bearish candlestick pattern on its weekly price chart coupled with the small bearish pattern on its daily price chart. The weekly RSI level stood at 32 down from 37 level of last week coupled with sustained weak cues on MACD and Signal Line.

Further, Bollinger bands showed a price hitting lower band which is a negative signal. Based on Fibonacci Retracement, as price continues to trade below all the levels an immediate support for the index is placed at 9951 levels and crucial resistance at 10417 levels.

The developing concerns over widening trade war coupled with its cascading effect for Indian market and new set banking fraud case is likely to keep index with woes.

Further, ahead of F&O expiry this week the volatility trade can’t be ruled out. It will be advisable to trade with cautions and follow stock specific opportunities with a tight stop-loss.

With strong breakout from crucial support level, we maintain a negative momentum with a range of 9870 levels on the downside and 10195 levels on the upside.

Here is a list of top three stocks which could give up to 10% return in the short term:

Manappuram Finance Ltd: BUY| Target Rs 116 | Stop-loss Rs 98 | Return 10%

Despite trading in a sideways direction, Manappuram made a strong rebound in the last trading session to form an uptrend channel on its price chart.

The scrip continued to take a strong support from 101-98 level, and decisively managed to break out from its 200-days EMA level coupled with strong volume growth.

The scrip formed a bullish candlestick pattern on its daily price chart coupled with positive cues from its MACD and Signal Line.

Further, the relative strength index or the RSI level signaled upwards bias. The support level for scrip is currently placed at 96 and resistance level from the upper band at 123. We have a BUY recommendation for Manappuram Finance which is currently trading at Rs. 105.80

ADF Food Ltd: SELL| Target Rs 182 | Stop-loss Rs 208 | Return 7%

ADF Food continued to consolidate on its daily price movement despite gaining a momentum on an intraday basis at 208 level but failed to vindicate the momentum, and slipped below its second support band.

The scrip continued to decline with about 12 percent on weekly basis, and weak support on volume front indicating a negative trajectory.

The scrip formed a strong bearish candlestick pattern on its weekly price chart as price continued to trade below all the moving average level which indicates a strong downtrend.

Further, the secondary momentum indicator continued to indicate negative signal with RSI -20.6 at oversold level coupled with weak support from MACD trend.

The scrip is facing a resistance at 213 levels and support at 176 levels which will remain crucial for scrip. We have a SELL recommendation for ADF Food which is currently trading at Rs. 195.50

Oil India Ltd: BUY| Target Rs 370 | Stop-loss Rs 335 | Return 6%

After consolidating across 319 levels, Oil India continued to trade on uptrend trajectory for a two consecutive session as it managed to breakout from its 50-days EMA levels indicating a positive signal.

The scrip also witnessed a volume breakout from its average level and managed to close on positive cues with about 3 percent gain on intraday basis during the last closing session.

On the daily price chart, the scrip made a solid bullish candlestick pattern coupled with RSI indicating a price just trading above its crucial resistance level.

The RSI at 55 levels indicates a favorable buying regime together with a strong cue from MACD and Signal Line. The scrip is now facing a resistance at 388 levels and support level at 328. We have a BUY recommendation for Oil India which is currently trading at Rs 349.95

MORE WILL UPDATE SOON!!