Looking for small and midcaps? Top 6 stocks to buy in the April expiry week

Midcap and smallcap indices rose over a percent each this past week, outperforming the headline index, and there are some stocks that investors can look at buying this week.

   

Midcap and smallcap indices rose over a percent each this past week, outperforming the headline index, and there are some stocks that investors can look at buying this week.

The Nifty rose 0.6 percent in the week ended April 20. However, price appreciation was on tepid volumes accompanied with a reduction in the daily price change as the week advanced, indicating lack of participation and maturing pullback rally.

Thin volumes, small real bodies and failure to sustain above 10,640 in the coming week can resume the corrections, dragging the index lower to levels of 10,380-10,300.

Definitely, when a stock trades above the 200-DMA, that’s a healthy sign, a sign of strength. However, only 200-DMA does not provide the complete health score of a stock.

One should also look at the chart patterns along with Dow Theory, which says indices must confirm each other and volumes must confirm the trend.

Technical indicators like RSI, MACD also provide fruitful insight in identifying start and termination of trends. Therefore, one should look at a combination of few filters before initiating a trade, but the idea is to keep it simple and not look at multiple indicators at the same time.

Midcap and smallcap indices over 1 percent each this past week, outperforming the headline index. Both indices have recovered from their oversold territory. However, they are still trading below the 50 percent and 61.8 percent Fibonacci retracement levels.

In a typical counter-trend pullback, rally indices/stocks tend to reverse from these retracement levels (i.e. 50 percent and 61.8 percent). If both indices fail to trade beyond these retracement levels corrections can resume.

Therefore, investors should look to book profits in the midcap and small stocks on rallies to these retracement levels. However, there are few individual stocks within the midcap and smallcap space that can be bought, to name a few.

1) Amara Raja Batteries

2) Apollo Hospitals

3) Biocon

4) Century Plyboards

5) Cochin Shipyard

6) DCB Bank

 What should be the ideal strategy of investors for expiry week?

A) As per options open interest data, Nifty is expected to remain range-bound within 10,500-10,600 levels in the coming week, which happens to be the April F&O series expiry week.

Investors can use this range to take long and short trades accordingly. Alternatively, they can opt for a short strangle strategy.

3 positional calls are as follows:

Avanti Feeds: BUY| Target Rs 2,900

The stock is on the verge of a breakout from a falling channel resistance placed at Rs 2,400. A sustained trade above this resistance with healthy volumes can resume the uptrend taking it to levels of Rs 2,700-2,900.

Further, RSI has turned upwards from its previous support zone of 43, currently trading above the 50 level suggesting higher levels in the coming trading sessions.

ITC: BUY| Target: Rs 320

The stock formed a sizable bull candle with healthy volumes indicating bullishness in the stock. Further, it has closed above the midpoint of the channel and its nine-weeks high of Rs 275.

On the monthly time frame, RSI has turned upwards from the neutral level of 50 suggesting higher levels in the coming trading sessions. A sustained trade above Rs 275 can extend the up move to levels of Rs 290-320 being the GAP area.

REC: BUY| Target Rs140

The stock is on the verge of a breakout from an Ascending Triangle consolidation suggesting a bear trend reversal on cards. A sustained trade above Rs 132 with healthy volumes will trigger a breakout from the pattern taking it to levels of Rs 136-140.

Further, RSI has formed a positive divergence indicating higher levels in the coming trading weeks.

MORE WILL UPDATE SOON!!

Top 10 money-making ideas which could give up to 22% return in April expiry week

Here is a list of top 10 stock ideas from different experts which can offer up to 22% return in the next 30 days.

  

The Nifty rose 0.8 percent for the week ended April 20 and held onto to its crucial support placed at 10,500 levels. The index gained for the fourth straight week but the momentum seems to have disappeared. It is likely to face stiff resistance near 10,600-10,640 levels.

“There are a few technical pieces of evidence that justify 10,600-10,640 levels. First, post the Union Budget, the Nifty corrected from 10,638 and 10,631 on two occasions, which will now act as a strong hurdle,” Sameet Chavan, Chief Analyst, Technicals and Derivatives at Angel Broking, said.

This coincides with its 50 percent Fibonacci retracement of the recent fall from 11,171.55 to 9,951.90. Also, the upward sloping trendline connecting previous bottoms (9,687.55 and 10,276.30) is now converging around the same area.

Chavan sees the index heading to 10,750 levels if 10,600 is breached. “As a chartist, traders are respecting this zone of 10,600–10,640. In case of violation of this hurdle in the upward direction on a sustainable basis, we may see the relief rally getting extended 10,720–10,750. But it certainly does not change the broader outlook, as we still expect the possibility of selling pressure resuming at higher levels.

He advises traders to stay light for a while, focusing on key levels and adopting a stock-centric approach for the next few days.

As far as support levels are concerned, 10,495 followed by 10,355 would now be crucial.

We have collated a list of top 10 stock ideas from different experts which can offer up to 22% return in the next 30 days:

Tata Motors: Buy| Target Rs 372| Stop loss: Rs 327| Return: 10%

This counter is in a downtrend and remains an underperformer. It is moving in a well-defined down sloping channel since the highs of Rs 598 per share registered in September 2016. It again approached the demand line of the said channel, which attracted buying support and propped up prices from the lows of Rs 330 per share a couple of weeks back.

After retracing major part of the said pullback rally from Rs 325-372 levels, this counter appears to have formed a base around Rs 332 per share and looks ready for a take-off. Hence, positional traders should go long for an initial target of Rs 372 per share with a stop of Rs 327 per share.

PNB Housing Finance: Buy| Target Rs 1,469| Stop loss: Rs 1,297| Return: 8%

After the recent breakout above its 200 daily moving average, this counter slipped into consolidation phase and appears to have resumed its upswing from the said congestion zone of Rs 1,360–1,290 levels. In such a scenario it should head towards its logical target of Rs 1,469 per share. Hence, positional trade can create longs for the said target with a stop of Rs 1,297 per share.

Motherson Sumi: Buy| Target: Rs 372| Stop loss: Rs 332| Return: 6%

This counter appears to have resumed its upmove after trading in the recent congestion zone of Rs 350–335. After sustaining above Rs 340 levels, it can be expected to head towards its logical targets of Rs 372 per share. The stop suggested for the trade is Rs 332 per share.

Analyst: Sameet Chavan, Chief Analyst, Technicals and Derivatives at Angel Broking

Wockhardt: Buy| Target: Rs 863| Stop loss: Rs 748| Return: 8%

Post the correction in January, the stock slipped into consolidation mode. After three months, the stock burst through this congestion zone and confirmed a neckline breakout from the inverse head and shoulder pattern. Volumes during this price action were almost thrice its average daily volumes, indicating strong buying interest after the base building process. We expect the stock to extend this rally and eventually climb towards our near-term target of Rs.863 per share. Traders are advised to follow a strict stop loss at Rs748 per share.

Bata India: Buy| Target: Rs 857| Stop loss: Rs 763| Return: 7%

Since the last couple of weeks, this stock has been consolidating in a small range. On Friday, we witnessed a surge in the last couple of hours of trade. The surge was quite abrupt but confirmed a breakout from the near-term hurdle of Rs 791 per share on a closing basis. This was accompanied by massive volumes, providing credence to this move. One can look to go long for a target of Rs 857 per share by following a strict stop loss of Rs 763 per share.

Ramco Systems: Buy| Target: Rs 535| Stop loss: Rs 442| Return: 10%

The breakout from the bullish flag continuance pattern signals resumption of the next up leg after a couple of days breather in the stock. After correcting over 60% from its 2015 peak, the stock has been languishing in the Rs 600-350 range for over a year. In the current week, a swift rally backed by unusually high volumes indicates that the stock has attracted the attention of market participants as most midcap IT stocks have seen a decent rally over the past few months.

The bullish flag formation on the daily chart indicates a breather after the sharp rally and provides a fresh entry opportunity to ride the next up leg. The stock is likely to accelerate momentum and head higher in the near-term towards Rs 535 per share as it is the 80% retracement of the most recent down leg from Rs 572 to Rs 353 per share.

Zensar Technologies: Buy| Target: Rs 1,125| Stop loss: Rs 935| Return: 11%

The share price of Zensar Technologies has been trading in a rectangle formation by oscillating within a broader range of Rs 750–1,130 per share since August 2015. Over the past 15 months, the stock made multiple failed attempts to sustain above the Rs 960 mark, indicating stiff resistance at that level. The stock logged a breakout from the past 11 week’s consolidation range of Rs 857–997, backed by heavy volumes, indicating a resumption of the uptrend.

Among oscillators, the weekly moving average convergence divergence (MACD) found support from its nine week average and is now pointing upward. The Relative Strength Index (RSI) has retested earlier breakout levels indicating an acceleration of momentum after forming a base above the zero line.

The stock’s momentum is likely to accelerate and head higher in the near-term towards Rs 1,125 per share as it is the implicated target of the weekly consolidation (Rs 997-857) coinciding with identical highs near the upper band of the rectangle pattern of Rs 1,130 per share. On the downside, immediate support remains around Rs 935 per share as it is the placement of eight week’s exponential moving average (EMA) coinciding with the current week’s low.

D-Link: Buy| Target: Rs 126| Stop loss: Rs 102| Return: 22%

The D-Link stock has registered a breakout above the bullish flag pattern signalling a positive bias. The breakout was accompanied by strong volume of more than three times the 200-day average volume of 3 lakh shares per session, indicating larger participation in the direction of the trend. Thus, supporting continuance of the positive trend.

During the previous week, the stock witnessed a strong rebound from the support area of Rs 81 per share and rallied to Rs 112 per share in just three sessions. Post this, the index consolidated for the last three sessions during which it retraced its previous up move by just 23.6%, signalling a positive price structure.

We expect the stock to continue its current upmove and test levels of Rs 126 per share being the confluence of the 61.8 percent retracement of the entire decline from Rs 153 to Rs 81 and the high of February 2018 around Rs 126 levels.

PNC Infratech: Buy| Target Rs 205| Stop loss: Rs 166| Return: 15%

The share price of PNC Infratech remains in an uptrend, forming a rising peak and trough on the weekly chart. The stock has rallied to an all-time high of Rs 228 per share in December 2018. Since then, it has been in a corrective decline for the last three months. The recent price activity suggests that the corrective decline has approached maturity and is likely to resume a fresh upmove.

The stock has recently rebounded from the support area of Rs 150-155 per share, being the confluence of its 52-week EMA and 80 percent retracement of the previous up move from Rs 130 to Rs 228. The sharp upmove in the last two weeks from the support area signals a reversal of the corrective trend and offers a fresh entry opportunity. We expect the stock to continue with its current upmove and test Rs 211 per share, being the 80 percent retracement of the entire decline from Rs 228 to Rs 148 per share.

Godrej Properties: Buy| Target: Rs 850| Stop loss: Rs 685| Return: 9%

Godrej Properties’ share price was consolidating in a broader range of Rs 728–859 per share over the past two months. During this two month consolidation, the stock has taken support from the gap area of January 8 on multiple occasions, indicating sturdy base formation around Rs 728 levels.

At present, it registered a breakout from the falling trendline drawn adjoining subsequent high of Rs 912–849 supported by above average volumes, indicating termination of an intermediate correction. Among oscillators, RSI found support at its one-year long support base of 35, pointing upward, confirming base formation. The stock is likely to head higher in the near-term towards Rs 850 per share, which is the placement of identical highs coinciding with the upper band of the broader consolidation range of Rs 859-728.

MORE WILL UPDATE SOON!!

Volatility seen after 6% rally; these 10 stocks can return up to 27%

The market's upward trajectory was in spite of volatility in stocks traded abroad and crude hitting multi-year highs, primarily because investors continued to be hopeful that earnings would keep getting better.

 

The market continued its coasting in the green on Monday, having risen by nearly 6 percent over the past four weeks and recovering more than half the losses it witnessed since February.

The market's upward trajectory was in spite of volatility in stocks traded abroad and crude hitting multi-year highs, primarily because investors continued to be hopeful that earnings would keep getting better.

TCS' healthy Q4 earnings and outlook for FY19, a normal monsoon forecast by meteorological agencies, and consistent inflow from domestic institutional investors, also boosted sentiment.

After a rally of nearly 6 percent in four straight weeks, the market is largely expected consolidate in the coming week. The expiry of April derivative contracts would add to overall volatility.

Investors will continue monitoring earnings performance, crude oil prices and movements in the rupee going ahead, apart from developments pertaining to the Karnataka assembly elections slated to take place next month.

Markets will remain volatile during the next week with impending derivatives expiry and a number of companies’ annual results.

Apart from the ongoing corporate earnings season, markets would start factoring in the sharp rise in crude oil prices, and weakness in the rupee, Gaurav Jain, Director, Hem Securities said.

Brent crude oil futures crossed USD 74 per barrel mark last week, their highest since late 2014.

Here is the list of 10 stocks that can give up to 27 percent return:

Cyient: Buy | Target - Rs 780 | Return - 10%

Cyient reported Q4FY18 numbers wherein revenues were above our estimates mainly on account of higher-than-expected growth in the Rangsons business. A positive outlook for services and DLM, traction across business verticals would lead to strong earnings growth of 16.5 percent CAGR during FY18-20E.

We upgrade Cyient to Buy rating on the back of sustained earning growth momentum and revise target price to Rs 780.

Cyient USD revenues grew 8.3 percent QoQ to USD 164.6 million, above 7.6 percent QoQ growth and USD 163.5 million estimate. Revenues in rupees grew 8 percent QoQ to Rs 1,061.8 crore, above Rs 1,052.3 crore estimates.

EBITDA margins fell 50 bps QoQ to 14.1 percent, below our 30 bps decline, 14.3 percent estimate mainly due to higher material cost (up 76 percent QoQ). Reported PAT of Rs 118.4 crore was above our Rs 96.1 crore estimate on account of lower-than-expected tax rate (ETR of 21.3 percent as a percentage of profit before tax versus our estimate of 28 percent) and higher other income (Rs 40.8 crore versus Rs 27.3 crore in Q3FY18).

Cholamandalam Investment: Buy | Target - Rs 1,775 | Return - 14%

Cholamandalam Investment and Finance Company (CIFL), incorporated in 1978 as the financial arm of the Marugappa Group, is one of the leading vehicles finance (VF) companies in India. Starting business firstlyin South India, CIFL has now presence in around 27 states and AUM is well diversified, both geographical as well as product wise.

CIFL reported significant improvement in assets quality (GNPA ratio reduced to 3.7 percent in Q3FY18 versus 4.5 percent in Q4FY17) and also concern on Home Equity segment’s assets quality eased as the company repossessed 43 properties under SARFESI which will be auctioned soon.

Management’s focus on NPA recovery, reducing credit cost and quality performance of vehicle finance segment would improve the assets quality going forward. AUM is likely to grow at around 20 percent in coming fiscals given strong activity momentum in commercial vehicle (CV) & overall auto industry and expansion into newer segments like LAP and MSME financing.

The stock has already rerated; increased by 45 percent over the last six months, factoring improving operational and financial performance. We assign ‘Buy on Dips’ rating to the stock with potential price of Rs 1,775 per share (upside potential 13 percent, holding period 12-18 months).

Radico Khaitan: Buy | Target - Rs 500 | Return - 15%

We maintain Buy on Radico Khaitan with catalysts expected from strong Q4FY18 results (+55 percent YoY) and faster debt reduction.

Most of the investors were surprised to know that Radico Khaitan has 50 percent share in India's Vodka market and is India's third most profitable liquor company.

Investors showed keen interest in understanding its drivers for earnings improvement in past 2 years. The management highlighted that it would continue its focus on premiumisation and debt reduction.

With improving demand scenario for liquor and execution on track, we remain constructive. We may upgrade our earnings forecasts if the company reduces its debt faster-than-expected. Target price of Rs 500 based on 35x FY20E PER.

Bajaj Electricals: Buy | Target - Rs 735 | Return - 14%

Bajaj Electricals's project business secured two large orders worth Rs 3,000 crore recently in rural electrification segment. The order book has increased by 150 percent to Rs 5,000 crore which is executable over the next 2 years.

We have raised our FY19-20 earnings forecast by 12 percent as we factor in these large orders into our revenue forecasts. As per the management, the margins on these orders are on the expected lines. We now forecast Bajaj Electricals' EPS to rise 50 percent in FY19 and 31 percent in FY20. Our new SOTP based target price is Rs 735 versus Rs 674 earlier.

We maintain strong Buy on the stock as we continue to like its consumer business which contributes 57 percent to Bajaj Electricals' profits. Catalyst from earnings upgrades from new order wins and accelerated growth in consumer business.

Torrent Pharmaceuticals: Buy | Target - Rs 1,570 | Return - 12%

In Torrent Pharmaceuticals, there is likely improvement in its domestic business. We expect Unichem acquisition is a strategic fit for Torrent Pharmaceuticals, as the deal would further strengthen its presence in key chronic therapy segment and improvement in profitability of Unichem’s product portfolio through its own strong field force and robust distribution network.

Its domestic business is expected to clock 25.7 percent CAGR led by Unichem acquisition, while Brazilian and RoW businesses are likely to witness 12.5 percent and 12.2 percent CAGR, respectively over FY17-20E.

Looking ahead, we expect Torrent Pharmaceuticals' sales, EBITDA and PAT to clock 14 percent, 17 percent and 12.5 percent CAGR, respectively through FY17-20E, while EBITDA margin is expected to improve by 197bps to 25.5 percent during the same period.

We maintain our fundamental Buy recommendation on the stock with a target price of Rs 1,570.

Ashok Leyland: Buy | Target - Rs 175 | Return - 13%

We recently attended Ashok Leyland's (AL) global conference, which reinforced our positive stance on the company as: (1) management guided for growth in FY19/20 & expects the shift towards higher tonnage vehicles to sustain; (2) focused strategy on exports/spare parts yielding results—up >30 percent in FY18; (3) product launches across categories.

We were impressed by the company’s effort to create a new 41T (lift-axle) category via intelligent engineering of existing 37T (lift-axle) offering; and (4) management envisages strong profitability in the LCV business. We believe, given the decisive shift in the industry’s product mix and Ashok Leyland, margin can surprise on the upside once the heightened competitive intensity and commodity cost headwinds subside.

We maintain that our robust demand outlook will be driven by ban on overloading, replacement demand, GST and driver shortage; our recent channel checks in South India validate our thesis. We maintain 'Buy/SO' with SOTP-based target price of Rs 175.

Ambuja Cements: Buy | Target - Rs 290 | Return - 17%

Ambuja Cements has strong balance sheet and consistently reporting steady performance on quarter on quarter due to healthy sales. The company

expects with the government's continued focus towards infrastructure development, affordable housing, smart cities, concrete roads and highways, coupled with remonetisation and the structural reforms pursued by the Union Government in the form of GST, it is expected that the economy would return to a high growth trajectory.

With its continued operational excellence programs, combined with segmented marketing and value added special cement products and building solutions, Ambuja Cements is well placed to benefit from economic growth trajectory.

Thus, it is expected that the stock will see a price target of Rs 290 in 8 to 10 months time frame on current P/E of 24.99x and FY19 EPS of Rs 11.61.

Container Corporation of India: Buy | Target - Rs 1,602 | Return - 19%

Container Corporation is well poised to tap the new business opportunities arising from potential growth in EXIM container volumes. In-depth knowledge of multi modal logistics business, availability of fairly large fleet of rolling stock, specialised container handling equipment, customised owned/leased containers and fully computerised commercial operations with internet based customer and customs interface provide

it a strong competitive advantage in availing opportunities for further growth.

Moreover, the management of the company expects increase in container traffic due to development of dedicated freight corridors. Thus, it is expected that the stock will see a price target of Rs 1,602 in 8 to 10 months time frame on a target P/E of 34x and FY19 (E) EPS of Rs 47.11.

Entertainment Network India: Buy | Target - Rs 827 | Return - 20%

Entertainment Network India Limited (ENIL), a Times of India (Bennett Coleman) Group Company is the leading radio network with 76 stations. This will fortify its presence in the top cities with dual stations.

ENIL registered healthy revenue, EBITDA and earnings CAGR of 14/15/17 percent over FY13-16, despite zero inventory addition. Over FY16-18E, ENIL’s operational stations expanded from 32 to 52. Yet, its revenue, EBITDA and PAT grew by 3/-15/-46 percent CAGR. This is primarily owing to economic slowdown and company specific issues in FY18.

Launch of new stations accentuated the decline. Led by economic tailwinds, consequent higher utilisation and price increases in established stations, and as new stations start contributing we expect ENIL to register healthy revenue and earning CAGR of 15 percent and 47 percent from FY18-20E. Initiate Buy with target price of Rs 827 at 30x FY20E FCFE per share.

Music Broadcast: Buy | Target - Rs 492 | Return - 27%

Music Broadcast (MBL), a Jagran Prakashan Group Company, is one of the leading radio networks in India. MBL has expanded from 20 stations in 2015 to 39 now. This includes eight Radio Mantra stations acquired from Jagran group and 11 new stations acquired in phase III, ensuring increased reach and more audiences.

Led by economic tailwinds, consequent higher inventory utilisation, and growth in new stations we expect MBL to register healthy revenue and earning CAGR of 13 percent and 22 percent from FY18-20E. Core return on capital employed (ROCE) will improve from 11.8 percent to 19.1 percent. Initiate Buy with target price of Rs 492 at 30x FY20E FCFE per share.

MORE WILL UPDATE SOON!!

Nifty likely to remain volatile this week; 3 stocks which could give up to 12% return

Here is a list of top three stocks which could give up to 12% return in short term.

   

The Indian equity market continued with a winning streak on the weekly basis although it ended the last session on the lower note.

The Nifty50 index firmly managed to close above a psychological level of 10,500 last week despite the global volatility, and continued with positive momentum on its weekly price chart.

Although, the momentum was lost to bear regime during the closing week to touch 10,527 levels on the backdrop of a global and domestic factor, but it managed to recoup the loss to close at 10,564 levels with about 1 percent gain on weekly basis

The rangebound trading levels on last day formed an indecisive ‘Doji’ candlestick pattern on the daily chart but continued with bullish candlestick pattern on weekly basis indicating a sideways level trade.

The relative strength index (RSI) level on weekly chart stood at 57 indicating an upward movement from earlier level coupled with a positive cue on MACD.

Based on a Fibonacci retracement, a support for the index is placed at 10,409 levels and resistance at 10,570 levels. Going ahead, in a week with F&O expiry coupled with earnings data, the rangebound trade for index remains intact from the price action of last closing session.

However, after decisively breaching upward from 10,400 and 10,500 levels, the momentum still hold for the bullish regime on weekly basis. Therefore, continuing with the stop-loss regime we maintain a rangebound trade for the index at 10,690 on upside and 10,430 levels on the downside.

Chambal Fertilizers & Chemicals Ltd: BUY| Target Rs 226 | Stop-loss Rs 190 | Return 12%

After making a marginal consolidation across 173 levels from 186 peaks, Chambal chemical traded on a positive trajectory on its long-term price chart.

The scrip touched the upper circuit in last trading session despite remaining muted in preceding trade and witnessed a significant volume growth in the current level, indicating a sustained trend.

On the daily price chart, after closing with about 6 percent the scrip made a strong bullish candlestick pattern indicating continued momentum.

Although the scrip remained on the oversold zone with weekly RSI level at 71, the MACD continued to signal positive trend on the current level.

With price trading above major levels, the scrip has a support at 177 levels and resistance level at 233. We have a BUY recommendation for Chambal Chemical which is currently trading at Rs. 201.85

Welspun India Ltd: BUY| Target Rs 64 | Stop-loss Rs 50 | Return 10%

Welspun India witnessed a substantial momentum during last week’s session after a forming a strong base across 51 levels and formed a reversal trend on its weekly price chart.

After entering the oversold zone, it decisively pulled back near 59 levels with about 11 percent gain on an intraday basis. Further, the scrip witnessed a 10x times volume growth in last week’s trade indicating a positive cue.

The scrip formed a bullish reversal candlestick pattern on its daily price chart after forming a ‘hammer’ kind of a pattern on the previous session which signals a positive momentum.

Further, a secondary momentum indicator witnessed a revival with weekly RSI level shifting upward coupled with positive crossover on MACD in near-term.

The support level for scrip is currently placed at 45 and resistance level from the upper band at 89. We have a BUY recommendation for Welspun India which is currently trading at Rs. 58.05

Eveready Industries Ltd: SELL| Target Rs. 310 | Stop-loss Rs 350 | Return 5%

Eveready Industries continued to consolidate on its daily price movement on the backdrop of sustained selling on a higher level. Although it managed to touch 351 levels on an intraday basis but failed to sustain the level to breach below its crucial support level of 200-day EMA.

The scrip also witnessed a negative volume trend last week, and lost about 10 percent on a single day. The scrip formed a solid bearish candlestick pattern on its weekly price chart after breaching below 200-day EMA level which indicates a strong downtrend.

Further, the secondary momentum indicator continued to indicate negative signal with RSI at 38 level coupled with weak support from MACD trend.

The scrip is facing a resistance at 368 levels and support at 292 levels which will remain crucial for scrip. We have a SELL recommendation for Eveready Industries which is currently trading at Rs 328.05

MORE WILL UPDATE SOON!!

Use a sharp mkt correction to buy these 3 stocks which can give up to 100% return

Here is the list of three stocks that can give up to 100% return.

   

In the past, Sensex earnings have looked suppressed due to higher provisioning by banks, which impacted their profitability. Resolutions by the National Company Law Tribunal (NCLT) been quite encouraging as a number of cases have seen substantial interest from potential suitors. This may lead to lower-than-expected haircuts and a resultant reversal of provisions.

The recent bond yield correction and spreading of bond portfolio losses over the next four quarters will provide some cushion to banking sector earnings. A higher supply of government securities, particularly from state governments, along with a further rise in crude oil prices, is a cause for concern for markets in the near-term.

The re-rating of equity markets from this point onwards will hinge on Q4 FY18 corporate earnings. The Q3 numbers showed initial signs of corporate profitability limping back, but the next few quarter numbers shall define the market direction. Two things that should work in favour of a recovery in corporate earnings are: a) On a comparative YoY basis, they should reflect better numbers on a low base due to demonetisation and normalisation of disruptions caused by rollout of the Goods & Services Tax last fiscal; and b) Expectations of a pick-up in the reported GST numbers should have incremental flow of business to the organised sector, albeit in a gradual manner.

This should ultimately reflect in the better earnings profile of India Inc and the earnings projections of the index over the next few quarters. Our sense is that corporate earnings should compound at 13-14 percent CAGR over the next two years. That should give an impetus to forward multiples underpinning index valuations.

For 2019, equity markets could be driven by a mix of domestic and global factors. The Indian economy is likely to go through a political and structural shift in the next few months. The government may want to expand spending ahead of elections, but needs to keep its fiscal deficit and inflation expectations under control. How the government manages to balance these economic demands and the reality of politics will eventually determine how the Indian markets pan out during the year.

The result season has begun on a positive note with large companies from the information technology, cement, private banks space declaring higher than expected earnings. This week, quarterly earnings, trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) will dictate the trend on bourses.

Any sharp correction is a good opportunity for investors with a long-term horizon to start building a portfolio of quality stocks to ride the next phase of the larger uptrend. We recommend investors to be stock specific and consider companies with good earnings visibility at decent valuations.

Here is the list of three stocks that can give up to 100% return:-

Tejas Networks

We believe Company is a strong play on Telecom ancillary space and are very excited about its prospects. It tends to be seen as a telco player, but is a made-in-India software story in the product and technology space for the telecom industry, competing with global companies globally and in India.

Tejas Networks (TJNL) is an Optical and Data Networking products company which designs, develops and sells high performance products to Telecom Service Providers. TJNL’s revenue mix consists of Optical Networking Products which contribute ~90% to its topline whereas Services contribute ~10% to topline. As far as Geographical mix is concerned TJNL derives 67% of its revenues domestically and 33% from foreign markets with a large chunk from US and Middle East. The Company boasts of impeccable R&D discipline to ensure continuous portfolio enrichment through innovations and high domestic market share. Lack of peers and infrastructure indicate huge opportunity for the Company. Tejas Networks is the 2nd largest optical network Company of the world behind Chinese Company and is competing with giants of the world.

The company is an optical and data networking products firm with customers spread over 60 nations. It designs, develops and sells software enabled networking equipment products to telecommunications service providers, internet service providers, utility companies, defence companies and government entities. To its credit, the Company has end to end data networking portfolio with 333 patents and 250+ Silicon IPs. It may be noted, that customers in telecom industry are investing significantly in optical networking. The engineering team at Tejas Networks, was developing technologies for programmable silicon chips, so that clients' hardware could be upgraded or new features built upon it, without overhauling the equipment. They call the innovation 'software-defined hardware', where the hardware itself becomes programmable. It has helped Tejas transition products and solutions as applications moved from voice to data.

The Company is a major beneficiary of BharatNet project introduced by Government of India. The government has embarked on the BharatNet project to lay optical fibre cables. It is pumping in Rs 10,000 crore in 2017-18 under this, with fibre laid out already in 1,55,000 km. If Digital India has got to be a reality, only half of India can be connected by private telcos and on data. The government has earmarked Rs 45,000-crore for BharatNet over multiple phases.

TJNL core DNA is R&D (52 percent of total employees in R&D) at a cost efficient manner as compared to US players. Like Apple, the Company outsources capital intensive manufacturing from contract manufacturers. Operating cost is mainly manpower cost.

Tejas enjoys high entry barrier against domestic competition. India’s optical capex growth rate is 2x China. Push for Make in India and Digital India will give a push to the Company. In addition, government schemenamed “Bharatnet” of connecting 2,50,000 gram panchayats using GPON technology will give push to Company’s topline.

Its products are used to build high-speed communication networks that carry voice, data and video traffic from fixed line, mobile & broadband networks over optical fibre. They also utilize programmable software-defined hardware architecture with a common software code-base that delivers an app-like ease of development and upgrades of new features and technology standards.

The Company offers a family of architecture and sell architecture of different capacities. The product lifecycle is of 7-10 years. It has IPR created over 15 years.

The company’s management is optimistic about expansion to markets that have similar eco pattern like India viz. South East Asia, Latin America, and Africa, among others.

The Company had informed stock exchanges that it's FY18 revenue is likely to dip yoy versus 5 percent growth guidance. The Company attributed the guidance change to delays in receiving certain large orders. However, it has mentioned that the order pipeline remains healthy and the Company is set to report good PAT in FY19.

For the company, India is its biggest geographical segment in terms of revenue as 65 percent of its total revenues. The company’s clientele generated 88% of FY17 revenues from repeat business. In terms of contribution of top five customers, 58% of revenues were contributed by them in FY17.

The Company’s operating revenues and EBITDA have witnessed a CAGR of 24% and 41% respectively over the period FY13-17 to Rs 878.2 crore and Rs 174.2 crore. In FY17, there was a prudent onetime writeoff of Rs. 30 crores (wireless LTE) instead of amortization. Typically, if R&D employee cost is Rs. 100 - Rs. 70 is capitalized and amortised over 10 years while balance Rs. 30 charged as expense in Profit & Loss (same year).

We believe the benefits of Asset light business model and operating leverage have started kicking in and would be reflected in coming quarters. With steep increase in topline, the company has benefited from the operating leverage while margins have expanded from 12% in FY13 to 19.8% in FY17.

However, since most of its clients are in telecom sector where payment cycle is tough, the company has an bloated working capital cycle. The company’ net working capital ex cash stood at 235 days (debtor days of 149 days and inventory of 76 days) indicates that cash generation ability is tough despite higher profitability due to nature of industry which we consider as a headwind and can affect investor's confidence.

The high concentration of clients as one of the key risks. About 58% of its revenue (FY17) is generated from top five customers who exercise substantial negotiating leverage. The loss of one or more of significant clients could have an adverse effect on the business Meanwhile, the company will have to constantly enhance products that will address technological changes.

We believe that the company will deliver high growth in an underpenetrated industry and near monopoly status in domestic status. We expect a target of Rs. 450 by FY19 end.

Sequent Scientific

It’s an interesting story in Pharma space and can become a multibagger. We expect a major upside in this Company. Its been under pressure for a quite long time and expect a revival very soon. Once the stock gets re rated after it starts reporting good set of numbers from Q4F1Y8, we expect around 100 percent upside by FY19 end.

To give a background, Sequent Scientific Limitedheadquartered in Mumbai, India with a global footprint, operates in the domains of Animal Health (Alivira) and Analytical Services. SeQuent has seven manufacturing facilities based in India, Spain, Germany, Brazil and Turkey with approvals from global regulatory bodies including USFDA, EUGMP, WHO, TGA among others. Its API facility at Vizag is India’s first and only USFDA approved facility for veterinary APIs. The human API business of Sequent was recently demerged into Solara Active Pharma Sciences Ltd. (SAPS), with an appointed date of 1st October 2017.

Sequent Scientific Limited (SeQuent) wholly owned subsidiary Alivira Animal Health Limited (“Alivira”) through Alivira Ireland, has recently signed an agreement with simultaneous closing to acquire 100 percent of Bremer Pharma, Zydus Cadila’s Animal Health Business in Germany.

Bremer Pharma, founded in 1982 is a niche veterinary health company in Germany with focus on cattle and swine segments. Bremer has a portfolio of over 400+ registered products across Europe, Far East, MENA, Russia & Africa operating in vitamins, antibiotics and hormones. Bremer registered sales of €6.7Mn ($8.3Mn) in year ending March 31, 2018 with marginal losses. Bremer comes with a EUGMP compliant injectable manufacturing facility with approval from German Competent Authority LANUV. The site was recently re-inspected and obtained a renewed GMP certificate on 12th March 2018.

This acquisition provides Alivira’s with a beta-lactam & non-beta lactam injectables facility for EU markets, which compliments its Orals & Powders beta-lactam and non-beta lactam facility based at Barcelona in Spain. EU is Alivira’s largest market accounting to 60% of revenues.

With this acquisition, Alivira is a ~$150 Mn business on annualized basis with presence in 95+ countries. Alivira has strong presence in the formulations business in key veterinary markets of Europe, LATAM, India, Turkey, Africa and South East Asian countries. Over 80% of the revenues of Alivira are generated outside India, with manufacturing operations in Spain, Germany, Brazil, India and Turkey and R&D development in India, Turkey and Spain.

In last 36 months Alivira has successfully acquired and integrated over 8 businesses globally. These successful integrations, coupled with commercialization of API’s in US and aggressive new product development program will create sustainable value and speed up the revenue and margin growths in the coming years.

Commenting on the acquisition, Manish Gupta, Managing Director said ‘We are excited with the addition of Bremer Pharma to the Alivira fold as it consolidates our position as a leading Animal Health Company in the European market. This also provides comprehensive manufacturing footprint in EU across Injectables, Orals, Solids, and Powder range and front-end presence in Top 6 of 10 EU markets. The scale up and growth momentum will further drive the next phase of value creation through accelerated revenues and margin expansion in the business.’

Gayatri Projects

Hyderabad based GPL with over 50 years presence in infrastructure and Construction primarily undertakes Road, Power and Irrigation projects across the Country and owns almost all its equipments, enabling optimal cost control. It also has Joint Ventures (JVs) in Build-Operate-Transfer (BOT) projects and executes construction contracts in partnership with Indian and overseas Companies. Over the last couple of years, the Company has relooked at its business strategy and has made significant changes in its business model. The Company has evolved from an asset heavy business model to an asset light business model (pure play EPC business). Gayatri Projects is one of the fewer pure play EPC companies in the sector with zero exposure to HAM and small residual exposure in BOT projects.

The Company has derisked and diversified its portfolio both geographically and business wise. As a pure play EPC company, the Company’s order book largely comprises of road EPC projects, irrigation projects, land development and railways. It has a pan India presence and have projects ongoing in UP, Andhra Pradesh, Bihar, Orissa, Haryana, Northeast, Karnataka and Mumbai.

During November 2017, the Company achieved a major milestone in its value creation journey restructuring and demerger of its road BOT business. This is the final approval from NCLT. Consequently the road business will be demerged and listed as a separate entity Gayatri Highways Limited. GPL shareholders will directly own 74 percent of this entity. GPL consolidated balance sheet would be recast as of March 31, 2018 to exclude the assets and liabilities of the BOT businesses. Key impact of this is that the GPL consolidated debt would reduce by more than Rs.25 billion. All of its assets on BOT portfolio are successfully commissioned and toll and annuity collections have started. In addition to distributing the assets to shareholders and separately listing as announced earlier, the Company continues to look for ways to monetize this portfolio.

GPL is financially strong EPC player with high revenue visibility. There is a strong momentum of order inflow. The order book of the company is robust and stands at Rs. 120bn, which is 5.6x of its FY2017 revenues which provides strong revenue visibility.

The Company has recently won orders worth Rs. 28 bn from NHAI which is a testament of the Company’s project execution capabilities and prudent bidding strategy. The Company has one of the largest market share of NHAI awarded projects. The Compnay has bid pipeline of Rs. 75.49 bn for next 2 months.

The Management efforts are now very much directed towards efficiently executing these projects and the Company is confident of delivering 30% revenue growth in its construction business over next 3-4 years.

At CMP of Rs. 200, the stock is valued at a P/BV (x) of 3.9x on FY17Book Value. On anualized FY18 numbers, the stock trades at a P/BV of 3.3x. With due consideration to factors like a) strong presence in high growth construction sector, b) healthy and diversified order inflows with good revenue growth visibility, c) pan India operations spread across 15 states, d) strong in-house designing and engineering capabilities complemented by state of art fleet of construction equipment, e) highly efficient operations with strong execution capabilities - completed more than 6,500 lane km of road construction over the last 25 years, f) one of the largest market share of NHAI awarded projects, g) track-record of completing ~40 projects aggregating to Rs 90 billion+ value in last 5 years, h) strong financial position with significantly improving balance sheet, j) transformed its business from asset heavy to asset light business model – pure play EPC company with strong return profile, k) significant value unlocking through business restructuring, we recommend investors to “BUY” with a target of Rs. 279 (3.9x at estimated FY19 Book Value) for investors with a horizon of 9-12 months.

MORE WILL UPDATE SOON!!

4 strong quality contrarian buys post the recent correction

The escalating load of NPAs, bond yields and decline in credit growth rate are major issues faced by state run banks.

   

Crude is currently trading at a four-year price high of above USD 71 a barrel, which may trigger a rise in inflation. But given the election period, oil marketing companies (OMCs) may have to absorb the hike in cost, impacting their profitability.

March CPI inflation has eased to 4.28 percent from 4.4 percent in February due to reduction in food prices. However, any further rise in oil prices and monsoon outlook will adversely impact its trajectory.

The recent spike in crude oil prices is largely due to a sudden spurt in West Asian geopolitical tensions. A spike in oil prices above current levels can attract higher US supplies (shale oil). Considering this, oil prices are likely to be in the USD 60-70 a barrel range in the medium-term.

Average monthly inflows in mutual funds was Rs 20,000 crore till February. This has reduced to Rs 11,000 crore in March due to negative equity returns since February in global and domestic markets.

Additionally, introduction of long-term capital gains (LTCG) from April, led to marginal redemption in the last two months of FY18. There is a possibility that this reduction in inflows can be sustained in the medium-term due to higher volatility in the global and domestic markets.

The trend is likely to be positive as financialisation of assets will be key to household holding in India for a long time.

The pharma sector could emerge as a dark horse in FY19. The sector has been facing adverse conditions in both the domestic and global markets since 2016. All major Indian pharma giants were impacted due to stricter norms of the US Food and Drugs Association (USFDA) leading to subdued earnings and underperformance by the sector.

During the last couple of months, we have slowly shifted our view on the pharma sector from neutral to constructive. Their valuations are so attractive that it is impossible to avoid such businesses for the long-term as these are likely to stabilise over the next one to two years. It is especially true for companies which have shown positive regulatory approvals from the USFDA.

Avenue Supermarts (D’Mart):

D’Mart has a strong track record of high growth and profitability. Revenue/PAT has grown at 37/51 percent in the past five years. EBITDA margin is higher among peers due to better asset turnover and lean cost structure. The recent strategy revamp to include leased stores along with owned ones will accelerate its pace of growth. We expect high growth to continue aided by store additions, change in strategy, e-commerce, debt reduction and tailwinds from the Goods & Services Tax (GST). As a result, we expect the high premium to be maintained in the medium-term.

Bharat Electronics (BEL):

At present, BEL’s valuation looks attractive post the recent 20% correction in the last two months due to lower-than-expected allocation to defence from the Union Budget and stake dilution by the government. However, we continue to maintain our positive view on the stock given the strong order backlog of Rs 40,000 crore (5x FY17 sales) which provides a strong earnings outlook. Further, BEL has limited competition due to its niche capabilities, strong technological tie-ups, strategic nature of projects, capital-intensive nature and high gestation period. Going forward, BEL will emerge as a key beneficiary from the on-going defence modernisation programmes and the government’s focus on indigenisation.

Natco Pharma:

Natco Pharma is a vertically integrated pharmaceutical company with a presence across multiple speciality therapeutic segments. Focus on R&D and complex molecules will drive growth and stability in the business. The company is strategically placed in terms of backward integration for critical active pharmaceutical ingredients (APIs), which equips it to enjoy corresponding gains in terms of cost, quality, and logistics. EBITDA margin is expected to remain stable at 40% over FY18-20e, led by new launches in the US and India and improvement in operational efficiencies.

Tata Consultancy Services (TCS):

We remain positive that TCS will deliver better earnings growth under its new leadership. Despite external headwinds, revenue from its digital business stood at 22.1 percent in Q4 FY18, a growth of 40 percent YoY. The management is confident that one-third revenue will accrue from the new digital business by FY20. We are factoring in 7 percent revenue CAGR over FY17-20e given the strong deal pipeline in the non-BFSI sector, coupled with traction in the digital business and recovery in the retail vertical. At present, TCS is trading at a valuation of 19x FY20 P/E, which is acceptable considering its three-year historical average.

MORE WILL UPDATE SOON!!