Bad times are a good time to invest! Many stocks to turn multibaggers in next 3-4 years

I think the resolution of the trade war is critical to the global economy. Else, there will be an imminent threat of global recession.

  

Investors will have to be extremely careful about what they are investing in. Some of the stocks that have fallen will surely become multibaggers in three to four year but that doesn’t hold true for every stock that has fallen.

The Indian market is going through a challenging phase, ranging from higher tax impact on foreign institutional investors, slowing economy, weak monsoon, not-so-exciting earnings season and implication of the US-China trade war. However, in the last 24-48 hours, the finance ministry’s consideration of rolling back some of the budgetary proposals has lifted the spirit. The market participants are eagerly waiting for the eventual announcements from the finance ministry.

It shows that bad times are a good time to invest. Investors will have to be extremely careful while investing in what they are investing. Some of the stocks which have fallen will surely become multibaggers in three-four years but that can't be said about every stock that has fallen.

The US-China trade war has been lingering on beyond everybody's expectations. By now, the trade war should have had an outcome. As the trade war didn't lead to a desired outcome, China had no other option but to depreciate its currency yuan to make its exports competitive. It's a tit-for-tat-for-tit-for-tat kind of situation between the US and China. I think the resolution of the trade war is critical to the global economy, else there will be an imminent threat of global recession.

There are enough data-points in terms of trade volumes suggesting that the global economy is going through a slowdown. The global economy is not in recession at the moment but if the trade war doesn't get resolved soon, the global economy will surely be staring at a recession. As US presidential elections are in November 2020, (Donald) Trump can be expected to remain aggressive through his tweets.

The RBI MPC (monetary policy committee) has cut the repo rate by 35 basis points (bps), taking the repo rate to a nine-year low and the total rate cut in the last one year to 110 bps. Despite the rate cut, the challenge has always been that banks are not transmitting the rate cuts to the borrowers. Hence, the desired outcome of economic revival is not taking place despite RBI's rate cuts.

Out of the RBI's 75 bps cut done prior to recent meeting, only 29 bps has been transmitted to the borrowers by banks, according to RBI governor Shaktikanta Das. Because of lack of transmission, the economic activity is not getting stimulated. Till the time the transmission aspect is not addressed clearly and emphatically, the economy won’t witness a revival.

Corporate earnings have been a major worry for the past five years. The current quarter is presenting some interesting developments. The BFSI (banking and financial services) stocks have been doing well. Over the previous two-three years, banks have been aggressively into balance-sheet cleaning that is why profit scores of most of the banks were low during that time-frame.

In this quarter, as a result of that initiative, banks have shown strong growth in profitability due to low-base effect. But except the banking sector, the stocks in the other sectors have been languishing, reflected in their weak top-lines, volumes, revenues, profit margins, etc reflecting the impact of a slowing economy.

The repercussion of IL&FS default in August 2018 has led to defaults by many other corporates across sectors because the financial eco-system is inter-related. As a result, banks’ asset quality worries have increased, triggering the worry that the Indian banking system may have to deal with a new NPA (non-performing assets) cycle. Banks have painstakingly cleaned up their balance sheets over the last two-three years to address all the previous NPA issues. Fortunately, that clean-up act by banks has started yielding results.

MORE WILL UPDATE SOON!!

Gold prices at record high; will the rally last?

Central banks have bought net 224.4 tonnes of Gold in April-June quarter of 2019, and a total of 374 tonnes is H12019, the highest purchase in the first half of any year in 19 years according to World Gold Council data.

    

The price of Gold at MCX recently touched its record high of Rs 37,270, rallying about 18 percent year-to-date.

Globally, too, Gold prices have surged significantly. Gold is currently near a 5 year high and trades at $1,496.95 per ounce. It has rallied 16.7 percent YTD, however, Gold continues to trade well below its lifetime high of $1,900.

There are a number of reasons for the rally in Gold. The yellow metal is viewed as a safe haven and recent market turmoil has resulted in global investors preferring safe haven buying.

Recent developments in the global economy are behind this trend. Firstly, the escalation of the trade war between US and China has created significant uncertainty for the global economy as well as for financial markets. US Q2 GDP release revealed that business investment contracted for the first time in three years, which illustrates the rise in the uncertainty of economic prospects. This favours buying of safe haven assets like Gold.

Last year, the US Federal Reserve had hiked rates four times. Due to the rise in uncertainty as well as weakening prospects for the global economy, the US Federal Reserve has shifted policy and cut rates recently. Market participants expect further rate cuts. A weak monetary policy in the US again favours safe haven assets like Gold and US Treasuries.

The rally in Gold has been supported by central banks. Central banks have bought net 224.4 tonnes of Gold in April-June quarter of 2019, and a total of 374 tonnes is H1 2019. This is the biggest purchase in the first half of any year in 19 years, according to World Gold Council data.

The demand for Gold ETF has also increased; demand in Q2 of 2019 was 67.2 tonnes, approximately double compared to the same period last year. This shows a significant increase in investor demand.

Additionally, there are few reasons local to India which have supported prices. One of the major ones is the depreciation in rupee, driven by FII outflows, as well as an accommodative monetary policy. The monetary system is well supported by ample liquidity which on the margin can lead to a weaker rupee.

The lack of rally in oil is thus puzzling, but there are a few reasons at play why oil prices have been weak. China has continued to buy oil from Iran, which is keeping markets well supplied, this when IEA has cut demand growth forecasts for 2019 as well as 2020.

I believe that there is further upside for Gold prices. It is reasonable to expect that the US will continue with an accommodative monetary policy. The US yield curve has flattened (measured by US 10 year- US 2 year yield) which is not good for growth and the central bank would like to steepen the yield curve. This has led to increased expectations of a rate cut, as well as a round of Quantitative Easing.

In addition to the US, other major central banks around the world are easing policy, the European Central banks and Bank of Japan are expected to ease policy, and the PBoC is already pursuing a loose monetary policy.

This may push the US Federal Reserve to ease policy more than one would expect, for one they would not like the US Dollar to appreciate beyond a certain point.

The Chinese currency has depreciated recently, largely driven by a weak Chinese economy and the desire of the Chinese policymakers to neutralise the impact of tariffs.

The US President has expressed his desire for a weak US Dollar and this is another factor that can drive US interest rates lower.

The ongoing trade wars are unlikely to be resolved soon, and this helps drive Gold prices higher in a couple of ways. Firstly, it has the potential to push the world into a recession if trade wars were to escalate, and at best cause growth prospects to weaken. The uncertain outlook helps drive Gold prices higher. Secondly, trade wars can help ensure that monetary policy stays accommodative.

Also, the rupee may depreciate, which can further support Gold prices in the local market. The Indian currency is currently 7.6 percent overvalued, according to the BIS Real Effective Exchange Rate (REER), which is a reason behind the loss of competitiveness of Indian exports. This should correct and the rupee should depreciate, though I would expect the RBI to smoothen the rate of depreciation.

Secondly, the trade wars and deprecation of the Chinese currency is likely to result in depreciation of emerging market currencies, along with the INR. In the short term, FIIs’are likely to remain shy of investing in emerging markets, including India, which should support a weaker FX regime. This can further boost Gold prices in the local market.

There are a few risks though because of a weaker economy. Physical demand for Gold, especially in the festive season may not materialise, and a weaker crude oil price regime is supportive of the Rupee. These may dampen the rally in Gold, but I believe that Gold prices are likely to rise and should be a good investment.

MORE WILL UPDATE SOON!!

Sensex rallies 400 pts, Nifty back above 11K; 5 factors driving markets

Another reason for today's rally could be a short covering in most beaten down stocks. In previous session, 77 stocks among F&O segment saw a short build-up and 76 stocks saw long unwinding.

Bulls were back in action on August 14 driving the Sensex higher by more than 400 points and taking the Nifty above psychological 11,000 level, after a day of selling.

The buying was seen across sectors except for Pharma that fell more than 2 percent after Sun Pharma and Glenmark's June quarter earnings.

Most beaten down sectors like bank, auto, FMCG and metal gained more than a percent each.

The broader markets also participated in bounce back, but the gains were limited compared to benchmarks. Nifty Midcap index was up half a percent and Smallcap index gained 0.4 percent.

Sensex was up 430.93 points or 1.17 percent to 37,389.09 and the Nifty rose 126.60 points or 1.16 percent to 11,052.50 at the time of publishing this article.

Here are five key factors that drove benchmark indices higher:

US delays tariffs

Global stocks rebounded after the US announced a delay in the implementation of tariffs on some Chinese goods.

On August 13, the United States Trade Representative announced certain products including clothing and cellphones were removed from the tariff list based on “health, safety, national security and other factors”. Other tariffs will be delayed to December 15 from September 1 for certain goods, it said.

Another reason for delaying tariff is that it could impact US holiday sales.

The report also suggested that trade discussions between the US and China are likely to resume again.

Inflation data opens room for more rate cut

India's retail inflation rate in July eased marginally to 3.15 percent, remaining comfortably within Reserve Bank of India's (RBI) target level of 4 percent.

Despite the decline in overall CPI, the core CPI increased to 4.28 percent in July, from the revised number of 4.14 percent in June due to a rise in gold prices. SBI believes this is a temporary phenomenon and core inflation will ease going forward and converge towards headline CPI.

The inflation data indicated that there could be more rate cuts in October policy meet, experts feel.

The RBI has already cut the repo rate by 35 bps to 5.40 percent in its third meet this fiscal. We believe that RBI may not pause the rate cut cycle as of now, but the magnitude of rate cuts would depend on the GDP numbers.

Rupee recovers

The Indian rupee rebounded from the six-month low and appreciated 55 paise to 70.85 against the US dollar intraday amid positive trend in equity market after US delayed tariffs on some Chinese goods, easing crude oil prices and encouraging macro data.

On August 13, the rupee had plunged 62 paise to close at a nearly six-month low of 71.40 against the US dollar in line with battered equities as global market turmoil and Argentine currency crash drove investors to safe havens.

At the interbank foreign exchange, the rupee traded at 71.07 a dollar, up 32 paise from the previous closing.

Easing CSR rule and likely relief to foreign investors

The easing of new Corporate Social Responsibility rule also lifted market sentiment today.

The government will not operationalise the new corporate social responsibility provisions in the recently amended Companies Act that make violations punishable by jail, following intense lobbying by a panicked India Inc., as per a report by The Economic Times.

This comes after recommendations of making expenditure on CSR tax-deductible as well as treating non-compliance with CSR requirements a civil offence under the companies law.

Under the Companies Act, 2013, certain classes of profitable entities are required to spend at least two percent of their three-year annual average net profit towards Corporate Social Responsibility (CSR) in a particular financial year.

In addition, a media report also indicated that there could some relief from the surcharge on super-rich in coming days.

The finance ministry may soon consult the law ministry on how best to provide relief to foreign portfolio investors (FPIs) from the super-rich surcharge that was announced in the budget.

Technical view

Nifty managed to hold crucial 10,782 level and also rebounded sharply above psychological 11,000 mark, indicating the bounceback rally after a 184 points loss seen in the previous session.

Another reason for today's rally could be short covering in most beaten-down stocks. In previous session, 77 stocks among F&O segment saw a short build-up and 76 stocks saw long unwinding.

For time being upsides shall remain capped around 11,182 and unless Nifty closes above 11,146, strength should not be expected.

On the downside, 10,782 remains critical as a breach of this support shall drag down the indices into the crucial support zone of 10,576–10,512 on long term charts.

MORE WILL UPDATE SOON!!

Top buy and sell ideas

The market wiped out the two-day gains from the previous sessions and saw the biggest single-day fall in the past 30 days on August 13, dented by weak domestic and global cues. Reliance Industries' 10 percent rally, however, restricted the losses to some extent.

 

The BSE Sensex plunged 623.75 points or 1.66 percent to 36,958.16, while the Nifty50 lost 183.80 points or 1.65 percent to 10,925.90 and formed a large bearish candle, resembling a Long Black Day-kind of formation on daily charts.

The broader market also saw heavy selling pressure with Nifty Midcap and Smallcap indices falling 2.17 percent and 1.6 percent, respectively. Among sectors, Nifty Bank, Auto, FMCG and IT were hit hard, losing between 2 and 4 percent.

According to the pivot charts, key support level is placed at 10,836.3, followed by 10,746.8. If the index starts moving upward, key resistance levels to watch out for are 11,080.6 and 11,235.4.

Nifty Bank closed at 27,729.10, down 702.80 points. The important pivot level, which will act as crucial support for the index, is placed at 27,488.8, followed by 27,248.5. On the upside, key resistance levels are placed at 28,164.1 and 28,599.1.

Buy HCLTech with stop loss at Rs 1055 and target of Rs 1100

Buy L&T Finance Holdings with stop loss at Rs 99.2 and target of Rs 104

Sell Jindal Steel & Power with stop loss at Rs 96 and target of Rs 93

Sell Cummins India with stop loss at Rs 600 and target of Rs 575

Sell Bajaj Finserv around Rs 7150 with stop loss of Rs 7300 and target of Rs 6800

Buy Sun Pharma with a stop loss of Rs 433 and target of Rs 451

Sell Tata Chemicals with a stop loss of Rs 566 and target of Rs 530

Buy Coal India with a stop loss of Rs 199.5 and target of Rs 211

Buy Sun Pharma with target at Rs 455 and stop loss at Rs 435

Sell Federal Bank with target at Rs 79 and stop loss at Rs 86

Sell Just Dial with target at Rs 625 and stop loss at Rs 690

Sell YES Bank with target at Rs 75 and stop loss at Rs 83

MORE WILL UPDATE SOON!!

Stocks in the news: HDFC Life, Future Retail, ONGC, Apollo Hospitals, Coal India, Nalco

ONGC | Apollo Hospitals | RITES | Manappuram Finance | Nalco | Rain Industries | Glenmark Pharma and NMDC are stocks which are in the news today.

  

Here are stocks that are in the news today:

Results on August 14: Grasim Industries, IDBI Bank, Wockhardt, Jindal Steel & Power, Indiabulls Real Estate, General Insurance Corporation of India, GMR Infrastructure, IDFC, HDIL, Reliance Capital, HEG, Repco Home Finance, Voltamp Transformers, Deepak Fertilizers, Indraprastha Gas, Suzlon Energy, Jain Irrigation Systems, IIFL Finance, Gateway Distriparks, Unitech, Zee Learn, Sadbhav Engineering, Prabhat Dairy

July CPI at 3.15 percent against 3.18 percent, and July Core CPI at 4.3 percent versus 4.2 percent, MoM

ONGC Q1: Profit jumps 46 percent to Rs 5,904 crore versus Rs 4,044.6 crore, revenue falls 0.8 percent to Rs 26,554.7 crore versus Rs 26,758.5 crore QoQ.

Wabco India Q1: Profit dips 26.7 percent at Rs 55 crore versus Rs 74.7 crore, revenue declines 14.7 percent to Rs 637.8 crore versus Rs 747.3 crore YoY.

Balmer Lawrie Q1: Consolidated profit falls 37.6 percent to Rs 24 crore versus Rs 38.9 crore YoY, revenue slips 11.8 percent to Rs 431.4 crore versus Rs 488.9 crore YoY.

Apollo Hospitals Q1: Consolidated profit jumps 68.5 percent to Rs 57 crore versus Rs 33.9 crore, revenue rises 16.4 percent to Rs 2,571.9 crore versus Rs 2,210.5 crore YoY.

Kaveri Seed Q1: Consolidated profit climbs 9.6 percent to Rs 230 crore versus Rs 210.1 crore, revenue rises 8.4 percent to Rs 627.6 crore versus Rs 578.7 crore YoY.

Ashoka Buildcon Q1: Profit increases 1.1 percent to Rs 64.6 crore versus Rs 63.9 crore, revenue jumps 28.2 percent to Rs 876.8 crore versus Rs 683.7 crore YoY.

Reliance Infra Q1: Consolidated net profit up 19.6 percent at Rs 299.2 crore versus Rs 250.1 crore, revenue up 1.7 percent at Rs 5,466.7 crore versus Rs 5,373.7 crore, YoY

Uflex Q1: Net profit down 3.7 percent at Rs 90.9 crore versus Rs 94.4 crore, revenue up 3.9 percent at Rs 1,978.3 crore versus Rs 1,904.8 crore, YoY

Aarti Industries Q1: Net profit up 53.9 percent at Rs 137.4 crore versus Rs 89.3 crore, revenue up 0.7 percent at Rs 1,086.1 crore versus Rs 1,078.5 crore, YoY

Coal India Q1: Net profit up 22.3 percent at Rs 4,629.7 crore versus Rs 3,786.3 crore, revenue up 3.6 percent at Rs 24,934 crore versus Rs 24,070.8 crore, YoY

HAL Q1: Net profit up 62.6 percent at Rs 564.69 crore versus Rs 347.19 crore, revenue up 17 percent at Rs 3,291.4 crore versus Rs 2,813.8 crore, YoY

West Coast Paper Q1: Consolidated net profit up 21.5 percent at Rs 102 crore versus Rs 84 crore, revenue up 16.7 percent at Rs 535.2 crore versus Rs 458.7 crore, YoY

RITES Q1: Consolidated profit rises 12.6 percent to Rs 98 crore versus Rs 87 crore, revenue jumps 61.8 percent to Rs 537.7 crore versus Rs 332.2 crore YoY.

Manappuram Finance Q1: Profit climbs 36.1 percent to Rs 269.6 crore versus Rs 200 crore, revenue surges 25.2 percent to Rs 1,144 crore versus Rs 913.8 crore YoY.

PFC Q1: Consolidated profit dips 0.1 percent to Rs 1,383 crore versus Rs 1,384 crore, revenue rises 8.5 percent to Rs 7,580 crore versus Rs 6,984 crore YoY.

Godrej Industries Q1: Consolidated profit jumps 31.1 percent to Rs 103.4 crore versus Rs 78.8 crore, revenue dips 3.6 percent to Rs 2,845.1 crore versus Rs 2,951.3 crore YoY.

HDFC Life Insurance: Standard Life to sell 2.5 percent with an upsize option of additional 0.7 percent in HDFC Life on August 14 - CNBC-TV18.

Nalco Q1: Consolidated profit falls 85.8 percent to Rs 97.9 crore versus Rs 687.2 crore, revenue dips 29.9 percent to Rs 2,084.1 crore versus Rs 2,973.3 crore YoY.

Rain Industries Q1: Consolidated profit slips 51.7 percent to Rs 147 crore versus Rs 303.7 crore, revenue declines 12.2 percent to Rs 3,341.1 crore versus Rs 3,805.5 crore YoY.

Glenmark Pharma Q1: Profit falls 53.1 percent to Rs 109.3 crore versus Rs 233 crore, revenue rises 7.3 percent to Rs 2,322.9 crore versus Rs 2,165.6 crore YoY.

NMDC Q1: Profit rises 20.9 percent to Rs 1,179.3 crore versus Rs 975.3 crore, revenue jumps 34.8 percent to Rs 3,263.7 crore versus Rs 2,422 crore YoY.

Amazon in advanced talks to buy 8-10% stake in Future Retail

M&M - India Ratings and Research has re-affirmed company's long-term issuer/instrument rating at IND AAA. The outlook is stable

Container Corporation of India (CONCOR) and Indian Railways joined hands to commence container train operations from Suranussi, in Firozpur division of Northern Railway

CEAT has entered into an addendum agreement with Tyresnmore for making a further investment of up to Rs crore in Tyresnmore

IL&FS Engineering has received an arbitration award in favour of JV with Gayatri Projects for the Nagaland Road Project, for an amount of Rs 9,143 million

Wipro launches Edge Artificial Intelligence Solutions oowered by Intel

Bulk deals

MORE WILL UPDATE SOON!!

Stock picks of the day: A break below 10,850 on the Nifty could lead to further selling

Any decisive move below the 10,850 mark in the Nifty can trigger a fresh round of selling while on the higher side, while 11,100 levels should act as a key resistance area.

 

After witnessing some gains last week, the Nifty failed to remain in control as it decisively closed below the 10,950 mark on August 13. The market breadth was tilted in favour of bears on the back of weak global cues.

On the derivative front, Call writers were active in 11,100 and 11,000 strikes along with Put unwinding.

The market undertone is likely to remain bearish in the coming sessions as well. We are continuously witnessing a short build-up into prices which could weigh on the markets.

On the technical front, any decisive move below 10,850 mark in the Nifty could trigger a fresh round of selling while on the higher side, 11,100 levels should act as a key resistance area.

We are hopeful that as long as we trade below 11,100 levels on the Nifty, the current trend is unlikely to change and the index is likely to move towards 10,750 levels amid high volatility.

Here is a list of the top three stocks which could give 7-12 percent return in the next three to four weeks:

Reliance Nippon Life Asset Management: Buy| Target: Rs 267| Stop Loss: Rs 225| Upside 11 percent

The stock has been constantly trading well above its short and long term moving averages on the daily as well as weekly interval charts with the formation of higher highs and higher bottom pattern.

This week, the stock has given a fresh breakout above the key resistance levels of Rs 242 along with marginally higher volumes which suggest that upside is likely to continue in the coming sessions.

Traders can accumulate the stock in the range of 240-245 for the upside target of 267 levels, and a stop loss below Rs 225.

Bharat Electronics: Sell| Target: Rs 86| Stop Loss: Rs 98| Downside 8 percent

The stock has been consistently trading well below its long and short-term moving averages on the daily as well as weekly interval charts.

However, after testing Rs 97 levels on the higher side, the stock once again fell back towards Rs 92 levels in the August 13th session and gave a breakdown below the rising wedge pattern which is generally traded as a bearish pattern in the downtrends.

The negative divergences on the secondary oscillators also point towards more downside in the coming sessions.  Traders can sell the stock in the range of Rs 93-94 levels for the downside target of Rs 86, and a stop loss above Rs 98.

Adani Ports and Special Economic Zone: Sell| Target: Rs 339| Stop Loss: Rs 380| Downside 7 percent

In the recent past, the stock has given a breakdown below its 200-DEMA on the daily interval charts which was placed at Rs 385 levels. The stock entered into a bearish territory on the short-term charts.

In the August 13th session, the stock witnessed a fresh breakdown below the key support level after prolonged consolidation.

On the derivative front as well, the stock seems to have added short build up into the prices which suggest more downside in the upcoming sessions.

Traders can sell the stock in the range of 362-365 levels for the downside target of 339 levels, and a stop loss above Rs 380.

MORE WILL UPDATE SOON!!