Brokerages cheer HDFC Q3 results; Credit Suisse hikes target price to Rs 2,250

The lender reported net profit Rs 5,670.2 crore for the December quarter, a whopping growth of 233.3 percent year-on-year due to one-time gain after stake sale in life insurance business.

  

Shares of HDFC were under pressure on Tuesday, a day after the lender declared its December quarter results. The stock was lower by over 1 percent after trading about 1 percent higher in the opening tick.

The lender reported net profit Rs 5,670.2 crore for the December quarter, a whopping growth of 233.3 percent year-on-year due to one-time gain after stake sale in life insurance business.

The profit during year-ago quarter stood at Rs 1,701.2 crore, it added.

HDFC earned one-time gain of Rs 3,675.3 crore during the quarter, driven by stake sale in HDFC Standard Life Insurance.

Revenue from operations grew by 6.55 percent to Rs 8,667.15 crore in Q3, compared to Rs 8,133.78 crore in corresponding period.

Asset quality remained stable for the quarter as non-performing loans were at 1.15 percent against 1.14 percent in previous quarter.

Brokerages still maintain their positive outlook on the stock, with Credit Suisse hiking the target price to Rs 2,250.

Brokerage: Nomura |Rating: Buy | Target: Rs 2,000

The brokerage house said that core NII performance was supported by stable spreads. Further, core mortgage profit was supported by improving growth trends. Mortgage growth bottomed out, while asset quality was stable. Having said that, it said that recent rerating has limited the near term upside.

Brokerage: Credit Suisse | Rating: Outperform | Target: Raised to Rs 2,250

Credit Suisse said that the third quarter was a steady one, but net interest margins should improve in Q4. Q3FY18: Consolidated profitability remains strong with RoE at 21%. Meanwhile, it also said that NPAs were flat and management is not seeing any stress in affordable housing segment.

Brokerage: CLSA | Rating: Buy | Target: Rs 2,200

The global research firm said that an uptick in lending activity will lead growth & RoE. But, a rise in interest rates is a potential risk to spreads. The risk, it said, is due to rise in rates which can be mitigated by hike in corporate lending rates.

Brokerage: Motilal Oswal | Rating: Buy | Target: Rs 2,260

Motilal Oswal said that the company’s AUM growth continues to surprise; spreads stable QoQ. Further, it said that the company reported a steady quarter, with core PBT up 13 percent year on year. It observed that the firm has continued to surprise positively on the opex front. Retail loan growth impressive, despite intense competition & high base.

At 12:07 hrs Housing Development Finance Corporation was quoting at Rs 1,933.80, down Rs 19.45, or 1.00 percent, on the BSE. It touched an intraday high of Rs 1,973.00 and an intraday low of Rs 1,930.60.

MORE WILL UPDATE SOON!!

UPL Q3FY18 — Time to grab the weakness?

ULP is a long term play and its underperformance is a good opportunity to accumulate.

  

UPL reported a decent performance in Q3FY18 on the back of a 12 percent volume growth, although it is a slight miss on streets expectations. On a sequential basis, there was an 11 percent growth in revenues along with a 9.8 percent EBITDA expansion. Revenues grew 5.2 percent YoY, but due to pricing pressure there was a 7 percent contraction in operating margins which lead to a 2.6 percent fall in EBITDA. The substantial 40 percent decrease in interest cost helped in improving the net profitability.

Domestic operations need growth in farm incomes

Domestic operations recorded a decent 10 percent growth in revenues during the quarter on the back of the wheat herbicide sales and a delay in sowing in South. Cotton production was up 10 percent YoY which proved beneficial for the company. Slight improvement in MSP (minimum support price) helped in sales pick up during the quarter and the management believes that improving farm incomes would be the key to higher penetration of products, going forward.

High channel inventory impacted LatAm revenues

Margins in LatAm were impacted by very high accumulation of channel inventories during the start of the quarter which capped the price increase. Despite a slight delay in product launches during the quarter due to delay in registrations, new products received a good response and boosted revenues. Untimely rains in Brazil and Argentina delayed the overall planting season by around 15 days which would now tail in Q4.

Strong growth in Europe

Europe reported a strong 4 percent revenue growth on the back of a good sugar beet season and early sales of herbicides. Southern part of EU witnessed a very dry season which damaged crops like grapes and other vegetable that impacted sales. The company has introduced a line of new products in this segment and expects them to pick up in coming quarters.

North America impacted by decline in acreages

North America saw revenues growth of 8 percent YoY despite an impact due to decline in acreages for rice crop, which is a focus crop and accounts for a substantial portion of sales. Soybean and corn drove the revenue growth during the quarter.

China situation

Close down of factories in China owing to environmental concerns have put pressure on sourcing material which has impacted the margins industry wide. UPL too saw the impact, however, limited as the company is now venturing into manufacturing, though raw material sourcing still remains a concern in some cases. Going forward the company plans to expand the manufacturing facilities and benefit from the supply glut.

Move from Innovator to generic

Owing to the current stress on farm economics there has been a trend to move from Innovator products to generics. However the innovator products have also seen price cuts which has left little delta with generics. Moreover in many cases 100 percent replacement is not possible. With increasing product registrations there is immense competition and value from products remains the key.

Outlook

The stock has run up 5 percent in the last 12 months and corrected 2 percent since October ‘17, post which it is now trading at a 2019E PE of 15.7x and EV/EBITDA of 9.6x. With plans to expand in manufacturing which currently seems a strong market owing to closure of Chinese factories, good performance of the herbicide portfolio, a decent expectations from Rabi, good response for the new product launches along with the decent order book lined up, we believe the stock as a long term play and the underperformance is a good opportunity to accumulate.

MORE WILL UPDATE SOON!!

Budget 2018: Govt to plug loopholes; Bonus Stripping could come under taxman lens

Bonus stripping is a term used to structure a transaction of purchase and sale of shares of a listed company, which generates short-term loss which is set off against some other capital gains.

          

As we enter the Budget week speculation about Long Term Capital Gains tax (LTCG) or plugging the loophole around ‘Bonus Stripping’ becomes louder. Tax systems are complex and to keep it simple it leaves behind few opportunities, and if the government can plug this loophole, it could garner close to Rs15000-20000 crore in additional revenues, say experts.

To start with – what is bonus stripping and why has it become the talk of the town?

Bonus stripping is a term used to structure a transaction of purchase and sale of shares of a listed company, which generates short-term loss which is set off against some other capital gains.

This is achieved through acquiring shares of a listed company pre-bonus and selling original shares immediately and bonus shares after one year. Short term loss on original shares is set off against other capital gains and bonus shares are sold after one year to get a long-term capital gains exemption.

Most of the countries apart from India have a system of stock split rather than issue of bonus shares. “There is no other country in the world where bonus shares are valued at zero. It is only in India where we give this flexibility to rich investors to avoid paying capital gains tax.

You plug the loophole, you will get probably between Rs 15,000 crore and Rs 30,000 crore

It is a normal belief that there doesn’t exist ‘FREE Lunches’ and finding arbitrage opportunities are difficult but there exists one known as ‘Bonus Stripping’.

Tax systems are complex and to keep it simple it leaves behind few opportunities to save on it. As there is a tax haven on Long-Term Capital Gains, investors holding stocks, where bonuses are declared, have an opportunity to book a loss and set it off against other short-term gains.

It’s an ‘Open Secret’ and be assured the regulator knows it as well. It’s just the priority or lack of systems or lack of urgency which has kept it around for a long time. For a fair tax treatment, bonus stripping should be curbed and a probability exists of it popping up as an announcement in future.

Agarwal further added that LTCG would be a larger revenue source of taxes, however; regulating bonus stripping could be a fair approach immediately. With the challenge of lower tax avenues and higher spending, the odd remains in favor for an announcement of something to control this in the upcoming budget.

How does bonus stripping work?

Ashok Shah, Partner, NA Shah Associates explains bonus stripping with the help of an example:

• Suppose you haves short-term capital gains of Rs1,00,000 on sale of listed company shares

• On this, you would be required to pay capital gains of Rs15,000 (15%)

• Now you locate a company X, listed on the stock exchange, which is declaring bonus in the ratio of 1 bonus share for each share held. The market value of the equity shares of X is Rs. 1,000.

• After record date for bonus shares, the price of a share of X would drop to Rs. 500.

• If you do not desire to pay any capital gains tax, you buy 2,000 shares of X for Rs.2,00, 000 before the record date. On this, you will get 2,000 bonus shares after the record date.

• After the ex-bonus date, you sell 2,000 original shares of X for Rs. 500, realizing Rs. 1,00,000. As per Income tax rules, you get short-term loss of Rs1,00,000.

• You hold the 2,000 Bonus shares received by you for a period of one year and sell the shares for say Rs. 500 per share. For the purpose of computation of capital gains, the cost is taken at Rs. Nil but since long-term capital gains are exempt, you do not pay any tax.

• On an overall basis, against the cost of Rs.2,00,000, you have realized Rs. 2,00,000 making no gain or loss. But for tax purpose, you got short-term loss of Rs. 1,00,000 which you used to set off against short-term capital gains of Rs. 1,00,000 and you saved tax of Rs. 15,000.

Is Bonus stripping foolproof?

If you can prove that acquisition and disposal of the shares was not done with the main objective of tax avoidance, then as per current rules, you can set off the loss on bonus stripping.

If the main motive is tax avoidance or the transaction lacks commercial substance, Income tax department can invoke General Anti Avoidance Rules (if the quantum of tax advantage exceeds Rs. 3 crores).

Supreme Court in the case of Wallfort Stock and Shares Brokers in the context of dividend stripping had held that there was nothing illegal about dividend stripping. Thus, following the same analogy, even bonus stripping should be safe unless provisions of GAAR apply.

However, he cautions investors on resorting to Bonus stripping for claiming tax exemptions. “If you like the shares for long-term investment, then there is no harm in resorting to bonus stripping as it will amount to legitimate tax planning. But structuring the transaction solely as a tax avoidance tool is a risky affair.

MORE WILL UPDATE SOON!!

Budget 2018: Waiting for a dip? 10 years’ data shows Nifty rising up to 9% in following month post Budget

Investors’ are advised to remain stock-specific and avoid leverage play at current levels. They should sit on some cash which could be deployed on every dip.

    

Are you looking to enter the market but unsure about the timing? Is this market expensive? Are you waiting for a decline to enter? If you constantly ask these questions to yourself, then you are not alone.

Investors are waiting for a decline to commit fresh capital, but will the decline come in 2018 post Budget, especially after a strong rally seen in the equity market so far this year?

Well, history says otherwise. If you are waiting for a decline, chances of that happening are low based on anecdotal evidence. In the last 3 out of 10 years, Nifty rose in the month post Budget.

However, the trend is reverse if we look at 1-month ahead of the Budget wherein Nifty slipped in 6 out of last 10 years in the run-up to the big event.

The Nifty rallied 9 percent in the following month post Budget in year 2016, followed by 7 percent gain in the year 2010 and 2011.

Even the Economic Survey released on Monday highlighted some risks for the equity markets such as fund flows, higher crude oil prices, as well as high valuations. But, the way markets reacted and hit fresh record highs, looks like it has taken everything in stride.

This time, market volatility in the pre-budget period is the lowest as compared to the past 10 budgets. This indicates that unless the event springs up a huge surprise in terms of a surge in fiscal deficit estimate or a regressive measure such as a retrospective LTCG (long term capital tax) regime, we do not envisage market volatility will increase post budget, ICICI Securities said in a note.

Is sell on news possible?

With history suggesting fall in the preceding month, there was always chance of a bounceback post this event.

However, in 2017, Nifty rose 11 percent ahead of the event and rose 3 percent post the event in the next one month. But, for 2018, analysts are expecting some profit booking to trigger post the Budget.

One possible reason for the rally in 2017 was the fact that the index was reeling under the pressure of demonetisation as well as US elections. Hence, 2016 closed with mild positive bias.

However, for the year 2018, the conditions are opposite. We saw a strong rally in the year 2017 and in January as well. Hence, the possibility of some profit booking cannot be ruled out.

There has been a possibility of some profit booking since the last couple of months. But it seems that the market is in no mood to give any respect to recent hurdles.

However, the important event is around the corner now and the index has reached the important level of 11100 (161% Price Extension of the rally seen in 2008-2010). This level needs some attention and hence, a possibility of ‘Exit on News’ kind of scenario cannot be ruled out post the budget.

What should investors do?

Investors’ are advised to remain stock-specific and avoid leverage play at current levels. They should sit on some cash which could be deployed on every dip.

Short to medium term investors should look to take some money off the table in this rally. One can never predict a precise top and hence, it is always a prudent strategy to be safe than sorry, said Chavan of Angel Broking.

Analysts’ see Nifty climbing all walls of worries and hitting Mount 12K by December 2018. But, this time the leadership will be different, suggest experts. High beta small and midcap stocks which led the rally could see some pressure while largecaps could lead the rally on D-Street.

We see Nifty at 12,000 levels by December 2018. The last rally was led by small and midcap stocks but this time it can be largecaps which will contribute to the new highs in the market.

Yes, profit booking can be there in March. Investors can adopt buy on dips strategy. The current rally is the part of strong Q3 earning and expectations from upcoming Budget. Investors should remain invested in quality stocks and quality management.

Ashar further added that in bull markets, corrections are fast and the recovery is also fast. I don’t feel there is any problem at current levels but in case it drops towards 11000 which is “the shagun" level.

MORE WILL UPDATE SOON!!

Market Week Ahead: Union Budget, Economic Survey & earnings among 10 factors to keep investors busy

For the upcoming week, the big bang event will be the Union Budget, followed by earnings as well as the auto sales figures. Among global cues, US Fed meet as well as domestic and global data could dominate the Street as well.

The benchmark indices lost ground for the first time in last seven consecutive sessions, with the Sensex falling more than 100 points on Thursday but the Nifty ended the January series with 6 percent gains.

Profit booking in technology, auto, pharma stocks, and PSU banks after the announcement of recapitalisation amount for current fiscal pushed the market lower. However, gains in private banks, metals and infra stocks capped losses.

A sharp rise in oil prices and weak Asian cues due to losses in the US dollar dampened the market sentiment. Also, there was an increase in volatility during the day as traders rolled over their positions to the February series.

The 50-share NSE Nifty managed to hold 11,000-mark amid selling pressure throughout the session, before closing lower 16.30 points at 11,069.70.

In January series, the Nifty rallied 5.65 percent and the Sensex rose 6.5 percent while for the week, frontline indices gained more than 1.5 percent.

"Before Budget announcement on February 1, we can see a further short covering, which can take the Nifty higher towards 11,200. In case of no negative surprise, the Nifty would continue to form a base near 11,000. This uptrend should continue," ICICIdirect said.

For the upcoming week, the big bang event will be the Union Budget, followed by earnings as well as the auto sales figures. Among global cues, US Fed meet as well as domestic and global data could dominate the Street as well.

The Union Budget & Economic Survey

This is the biggest event for the markets and economy, in general. The government will be presenting the Union Budget 2018 for the next financial year next week.

It assumes significance as it is seen as the last full-fledged Budget in this tenure of Narendra Modi-led BJP government. The Street will watch out for cues from the event, whether populist or reforms-oriented and could see some reactions on that day.

The Budget Session will begin on January 29, 2018, and will end on February 9. The commencement will also see the tabling of Economic Survey. Meanwhile, presentation of the Union Budget by Finance Minister Arun Jaitley will take place on February 1. A second part of the Budget Session will be held from March 5 to April 6, 2018.

Q3 earnings of 465 BSE companies

Along with the Union Budget, there are several major companies that will be declaring their results for December quarter between January 28, 2018 and February 2, 2018.

Companies such as Divi’s Laboratories, Persistent Systems, Century Textiles, Emami, Wockhardt, ICICI Bank, Larsen and Toubro, Oriental Bank of Commerce, IDBI Bank and JSW Steel, among others, will be declaring their results.

Two major index heavyweights will be declaring their results on Monday — Tech Mahindra and HDFC.

The IT services firm is expected to report a profit after tax (PAT) of Rs 775 crore against Rs 836 crore during the previous quarter, a poll of analysts by CNBC-TV18 showed.

Meanwhile, the dollar revenue could rise 2 percent at Rs 1,200 crore against Rs 1,179 crore, while the rupee revenue could rise to Rs 7,760 crore. The company may also report a constant currency growth of 1.8 percent, lower than 2.3 percent in the previous quarter.

Meanwhile, Housing Development Finance Corporation (HDFC) may report a jump in its Q3 net profit of Rs 4,949.1 crore against Rs 1,701.2 crore, according to a poll of analysts by CNBC-TV18 showed. The jump of 190.9 percent is likely to be on the back of post-tax income of Rs 3,675 crore from stake sale in HDFC Life.

IPO

With an intention to raise around Rs 937 crore from its initial public offering (IPO) in its second attempt, Galaxy Surfactants is set to open the issue on January 29, 2018.

MUST READ | Galaxy Surfactants IPO to open on Jan 29: 10 things you should know

The price band for the issue has been set at Rs 1,470-1,480 per share.

The company plans an IPO of up to 6,331,674 equity shares of face value of Rs 10 each for cash.

ICICI Securities, Edelweiss Financial Services and JM Financial Institutional Securities will manage the company’s public issue. The company's equity shares are proposed to be listed on BSE and NSE.

Corporate Action

The Street will watch for a few stocks that will be in focus due to Board-related developments.

For instance, the Boards of Tata Steel and Piramal Enterprises will be meeting on January 31, 2018 for a rights issue. Moreover, companies such as Gayatri Projects, Sundaram Finance, IRB Invit, and eClerx will be in news for a scheme of arrangement as well as a buyback issue. Additionally, the Boards of companies such as HCL Tech, Bharti Airtel, Wipro, JM Financial, and Indiabulls Housing will be meeting to discuss their interim dividend.

Global Cues

The Street will also monitor any developments from the US, where the Federal Reserve will be holding its two-day monetary policy meeting. For now, investors could have factored in a ‘no rate hike’ scenario as it had recently raised it during the December meeting. Having said that, the Fed’s comments and outlook will be watched for cues.

Additionally, moves on the dollar will also be watched. The dollar index has been in a year-long decline, defying forecasts that it should strengthen from the fact that the Federal Reserve is raising interest rates and normalizing monetary policy faster than its counterparts, CNBC reported. But the opposite has happened, and the dollar weakened as flows increased into the euro and yen, as those economies improved, and central bankers in Europe and Japan look closer to removing their own heavy-handed accommodation.

Stocks in Focus

Apart from earnings scenario, a few stocks could be in focus on the back of corporate developments.

Maruti Suzuki Q3 profit up 3 percent; revenue, operational nos in line; cuts royalty payment

Indoco Remedies: The firm's Unit 1 in Goa inspected by USFDA in Jan 2018 received 8 observations

Avenue Supermarts Q3 net profit soars 66 percent to Rs 251.8 crore; revenues rise 23 percent.

LIC Housing Finance: The company’s Q3 net profit has fallen around 2 percent at Rs 491 crore.

JSPL: Net loss for Q3 trimmed to Rs 272.7 crore against Rs 453.3 crore year on year.

Macro Data

Among macro data in India, the annual GDP figures will be out next week along with as well as purchasing managers’ index (PMI) data.

On the global front, Japan will be releasing its industrial production data, along with Europe that will be declaring CPI expectations, among others. The US too will be declaring its employment data, which will be a metric to measure jobs scenario there.

Technical Factors

Bulls failed to keep the momentum going as Nifty50 snapped its 6-day winning streak on Thursday and made a ‘Hanging Man’ kind of pattern on the daily charts.

The index took support at its crucial 5-day’s exponential moving average (DEMA) before bouncing back. The index closed above 11,000 for the third day in a row.

A Hanging Man is a bearish reversal candlestick pattern which is usually formed at the end of an uptrend or at the top. In a perfect 'Hanging Man' pattern either there will be a small upper shadow or no upper shadow at all, a small body and long lower shadow.

“The near-term trend of Nifty as per smaller and larger timeframe is up and still there is no confirmation of any reversal pattern at the highs. Next important resistance to be watched is around 11,115 and 11,300 levels, which are 1.382 percent and 1.618 percent Fibonacci projections,” HDFC Securities said in a report.

It also said that Budget could lead the market for next week, but a top reversal is likely in the next 1-2 weeks. “The confirmation of top reversal pattern from the highs is likely to set the significance of reversal and quantum of expected weakness in Nifty the next couple of weeks,” the report added.

FII Data

The Street will watch out for cues from foreign institutional investors (FIIs). Interestingly, after five consecutive months of being net sellers, they have been net buyers for this month, buying around Rs 9,518 crore worth of shares so far this month.

Meanwhile, domestic investors have been net sellers of Rs 700 crore worth of shares.

Experts have earlier hinted how domestic liquidity has been driving the market ahead. With FIIs joining the party, they had also hinted at further highs on the market.

Oil movement

Crude oil prices touched USD 71 per barrel mark earlier this week, which, in some ways affected the market here. The trajectory of crude movement could likely impact the economy in India going forward, which in turn could affect the market as well.

Oil prices were firmer on Friday after hitting fresh three-year highs in the previous session, as weakness in the dollar continued to underpin prices with crude on track for a weekly gain.

"One has to question if this rally is sustainable. Downside protection is going to be warranted," said Brian LaRose, technical analyst at United-ICAP. Additionally, several experts have also spoken about demand getting reduced as well, which could possibly bring down these prices as well.

Auto sales

The new month will also signal auto sales figures for the month of January. Investors in auto stocks are on their feet, with the Nifty auto index falling over 1 percent. All major stocks have ended in the red, with auto ancillaries falling the most.

MORE WILL UPDATE SOON!!

Nifty likely to open with gap-up on Monday; likely to touch 11200-11300 ahead of Budget

The index is likely to hold the ground on the higher side till Budget unfolds and Nifty is likely to scale up towards 11200-11300 in the pre-budget rally.

  

The market witnessed a lot of action on the largecap front especially in IT, Banking and Metal sector which led Nifty to scale up above 11,000 and Sensex above 36,000 level.

Quarterly earnings growth is also on expected line which is giving comfort to the bulls.  The market looks little nervous ahead of the Budget especially on LTCG front and fiscal consolidation roadmap.

Most of the midcap stocks have witnessed profit booking and midcap index has corrected significantly ahead of the Budget.

We feel that the index is likely to hold the ground on the higher side till Budget unfolds and Nifty is likely to scale up towards 11200-11300 in the pre-budget rally.

Note: SGX Nifty closed 63 points higher at 11,137.

One should look to buy the stocks from the sectors which have shown a lot of expectation buildup for the forthcoming budget.

Sectors which are bullish on their long-term charts and have witnessed outperformance viz., sectors like Cement, Infrastructure, FMCG, and Automobiles are likely to exhibit bullishness ahead of budget as the near/short term charts are sustaining above breakout levels.

 Weekly and Monthly charts look positive and are forming a higher top, higher bottom formation indicating sustained uptrend. Weekly and monthly strength indicators are in positive territory, signifying sustained strength ahead.

Weekly chart pattern suggests that Nifty is likely to continue its uptrend in the short term and it can move towards 11,250-11,400 levels. However, on the downside 11,000-10,800 is likely to act as good support if any corrective action happens in the near-term

 Top 3-5 stocks which are looking attractive at current levels based on technical?

A) Technically private banks, Metal, FMCG, Fertilizer and IT space looks attractive for near-term play. We like HDFC Bank, Kotak Bank, VEDL, TATA Steel, ITC, HCL Tech, TechM, NIIT Tech from the above-mentioned space.

Escorts: CMP Rs 836.8| Target Rs 905| Stop Loss Rs 790| Time 8-15 days| Return 8%

Escorts is in up-trend across all the time frames forming higher top - higher bottom formation. Since June 2017, the stock was in major consolidation mode within Rs820-590 band on the weekly chart.

It gave breakout at Rs820 levels and is sustaining above the same. On the daily chart, the stock has given a breakout of up sloping trend line at Rs825 levels.

The stock is also sustaining above its 20, 50 and 100 and SMA which supports bullish sentiments ahead. Both weekly and monthly strength indicator such as RSI along with the momentum indicator Stochastic are in bullish territory.

Both are sustaining above their reference lines which signals strength and upward momentum in price. Thus, taking into consideration the above factors, the maximum upside can be expected to 890-905.

Vedanta Ltd: CMP Rs 345.4| Target Rs 370-376| Stop Loss Rs 325| Time 8-15 days| Return 9%

The most prominent observation on the price chart of Vedanta is that the entire consolidation underway since November 2017 till date has formed a Cup and Handle formation.

The breakout of this formation is witnessed at 345 levels on the daily chart. The stock is sustaining above its 20, 50, 100 & 200 day SMA which supports bullish sentiments ahead.

On the volumes front, the stock has witnessed a significant rise in breakout level indicating increased participation on the rally.

Both weekly & monthly strength indicator RSI is in bullish territory and sustaining above their reference lines which signals strength and upward momentum in price. Thus, taking into consideration the above factors, the maximum upside can be expected to 370-376.

Sudarshan Chemical Industries Ltd: CMP Rs 465.4| Target Rs 490-500| Stop Loss Rs 530| Time 8-15 days| Return 7.5%

The most prominent observation on the price chart of Sudarshan Chemical Industries is that the entire sideways consolidation underway since May 2017 till date has taken the shape of a "Horizontal Channel" continuation pattern formation.

The breakout of the "Horizontal Channel" continuation pattern formation was witnessed at 430 levels. The measuring implication of the price pattern i.e. the range of the consolidation (430-360 = 70 points) projected from the breakout level of 430 provides upside target of 490-500 approximately.

Stocks is sustaining above its 20, 50, 100 & 200 day EMA which supports bullish sentiments ahead. The stock is moving in higher Top higher Bottom formation across all the time frame indicating sustained uptrend. Volumes are significantly rising around breakout level.

Adani Ports: CMP Rs 436| Target Rs 460-470| Stop Loss Rs 418| Time 8-15 days| Return 7.8%

The stock has witnessed the breakout of symmetrical triangle pattern breakout on weekly chart at427 level. The stock was consolidating in range of 380-425 range since last three months.

The breakout of the Triangle pattern suggests stock can move towards 460-470 level in the short term. The stock is sustaining above all its important moving averages which support bullish sentiment ahead.

The weekly and the daily strength indicators are in positive territory which indicates the bullish trend to continue in short term.

MORE WILL UPDATE SOON!!

Budget 2018: Union Budget to keep market volatile; 3 stocks which can give up to 24% return

Here is a list of stocks which can give up to 24% return in 15-21 sessions:

  

During the last week, the benchmark indices hit another milestone as Nifty & Sensex registered a fresh all-time high of 11,110.10 & 36,268.19 levels respectively in Wednesday’s trading session.

However, in Thursday's session, traders decided to take some money off the table on the back of F&O expiry and the crucial event i.e. Union Budget.

Looking at the overall chart structure, Nifty had confirmed its breakout from a Rising Channel formation and resultant indices saw a sharp rally in past few weeks.

Now, the weekly RSI (14) has signaled medium term bearish divergence. Also, the 161.8% price extension of its entire move from the bottom of 850 to the top of 6357 which added to the bottom of 2253 comes near 11163.

The Brent Crude Oil crossed 70 marks and the Bond yield has started inching higher. In such scenarios, we advise traders to stay light with the position as the volatility likely to increase ahead of Union Budget.

On the index front, 10900 will act as an immediate support and any move below this level will pull index further lower towards 10780 / 10665 levels respectively.

Here is a list of stocks which can give up to 24% return in 15-21 sessions:

LIC Housing Finance: Buy at CMP 559| Target Rs627| Stop loss Rs535| Timeframe 15 to 21 sessions| Return 12%

Looking at the daily chart, the stock has formed a strong base near 540 – 535 zone and due to recent consolidation stock formed inverse head & shoulder pattern on daily chart.

The daily RSI (14) has signaled a probable range shift. Hence, we recommend traders to buy this stock at current level off Rs565 with a price target of Rs627. A Stop loss should be placed at Rs535 on a daily closing basis.

Motherson Sumi Systems Ltd: Sell around Rs370 – 375| Target Rs340| Stop loss Rs389| Time frame 15 to 21 trading sessions| Return 8%

Looking at the daily chart, the stock has been in a long-protracted uptrend since past several months and in that optimism, the stock hit a fresh all-time high of around Rs396.

Subsequently, stock saw mild profit booking which was followed by consolidation. As a result, the stock is forming a triangle pattern. The daily RSI (14) is struggling to cross 60 levels which doesn’t bode well for bulls.

Also, we are observing three-point bearish divergences on the weekly chart. Hence, we advocate traders to go short in this stock around Rs370-375 with a price target of Rs340 and a stop loss placed above Rs389.

Suven Life Sciences: Buy above Rs223| Target Rs268| Stop loss Rs196| Time frame 15 to 21 trading session| Return 24%

Looking at the weekly chart, the stock has confirmed its breakout from downward sloping trend line during mid-October 2017 which triggered a fresh buying interest.

In that optimism, the stock rallied towards 230. Subsequently, stock witnessed profit booking which led to gradual correction followed by consolidation.

Now, the daily chart has formed a Bullish Cup & handle pattern and the formation of handle formation is in process. The said pattern will be confirmed once stock breaches the Rs223 levels.

In that case, we expect an acceleration of bullish momentum and stock likely to rally towards Rs 268. A stop loss should be placed below Rs 196.

MORE WILL UPDATE SOON!!

Budget 2018: Short coverings ahead of the Budget could push Nifty towards 11,200

In case of no negative surprise, Nifty would continue to form base near 11,000 and this uptrend should continue. However, there has been some weakness seen in the midcap space which is not visible looking at the Nifty prices.

The Nifty has started closing above 11,000 levels amid some volatility. Before Budget announcement on February 1, we can see further short covering which can take Nifty higher towards 11,200.

In case of no negative surprise, Nifty would continue to form base near 11,000 and this uptrend should continue. However, there has been some weakness seen in the midcap space which is not visible looking at the Nifty prices.

The reason being the market participants were quite overboard on the midcaps instead of largecap stocks. This is where profit booking is quite visible in this space before the major Budget announcement.

The support from private banking and other non-banking heavyweights is continued. The first leg of profit booking was seen in IT heavyweights after continuous move in January series. These stocks are expected to pick up momentum back after a while.

The volatility has risen before the event. This is the same pattern what was seen before the last budget announcement in 2017.

After the Budget in 2017, volatility had cooled-off quite sharply from 17 percent to 12 percent within few sessions. We believe the same decline may be seen this time around in absence any major event after this.

The roll spread in Nifty turned negative from 25 points on the expiry day which shows rollover of short positions in the index. Sustainability of Nifty above 11000 post-budget should lead to short covering in the index.

Nifty Bank:

After re-writing history books, the Bank Nifty index ended at a new life high by moving above 27000 levels in the January series with broad-based participation in private as well as public sector banks.

Participants booked marginal profits in PSU stocks after the government moves to infuse more Capital.

The intraday volatility can be high ahead of the Union Budget 2018 and sharp intraday whipsaws can be seen going ahead as the volatility index has seen its sharpest up-move in the last few months and rose to 18 percent from 11 percent.

Rollovers were in line with the expectations and the short rolls is also seen for the February series. We feel in case of any major fall, this short positions will be covered which will further provide a cushion to the index and in absence of any negativity from the budget, we feel the index is likely to witness support near 26900 levels.

The current price ratio (BankNifty/Nifty) is near 2.47 levels. We feel the ratio is likely to move towards 2.52 levels on the back of outperformance in banking stocks whereas, on the lower side, support for the same can be seen near 2.43 levels.

Risk-on sentiment continues to drive FIIs inflows:

Melt up in equities continues unabated with MSCI world Index up 7 percent in 2018 (1.5 percent in a current week) and MSCI EM Index up 9 percent in 2018 (2 percent in a current week).

Money flow has strongly supplemented this flow as bond markets continue to grapple with higher bond yields and the bulk of incremental fund flows are seen in equity segment and that holds true for emerging markets as well.

YTD inflows in Indian equities have aggregated close to the US $ 1.6 billion already (1.1 billion in last 5 days) and other EM-like Taiwan & South Korea also has seen inflows of US $ 2.5 billion each.

In the F&O segment as well, there was bullish stance by FIIs, as they bought Index Futures worth over the US $ 100 million and Stock futures worth in the US $ 750 million.

Despite India VIX moving to 18 levels, there was option selling worth over the US $ 850 million, suggesting a bet on a strong January series expiry).

Rise in yields in the bond market has still not made inroads into long-dated part of the curve (e.g. US 30Yr) (where major bond portfolio lies) and hence the weak dollar story continues to ramp up strong EM FX and resultant strong EM equities.

This trade is strongly anchored into Dollar weakness and as long there is no swift and sharp reversal to dollar strength, the EM risk-on rally will continue to have a strong tailwind.

However, the key risk for the equity segment remains the sharp up move in 2018 already (the current rally has the strongest start to any year in a long time frame) and some profit taking around current levels.

MORE WILL UPDATE SOON!!