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!!