Top 5 sectors which are looking attractive post 2000-point drop in Sensex from highs

The S&P BSE Sensex has fallen 2600 points from its record high of 36,443 recorded earlier in the month of January to 33,819 which was the closing level on 22 February.

Global and domestic equity markets have undergone a sharp correction since early February, erasing almost all gains generated in the previous month. The correction has been largely on account of increasing concerns around rising bond yields and inflation.

The S&P BSE Sensex has fallen 2600 points from its record high of 36,443 recorded earlier in the month of January to 33,819 which was the closing level on 22 February.

In-line with the global trend, the domestic equity markets have also fallen significantly, reflecting a partial retracement of the sharp increase in stock prices and multiples over the past 12 months.

In addition to negative global cues, adverse domestic developments have also contributed to the correction. Equity markets may continue to remain under pressure in the near-term due to lingering domestic and global concerns.

However, we remain positive on equity markets in the medium to long-term on account of expected revival in economic growth, facilitated by bank recapitalisation and GST-led efficiency gains.

Corporate earnings are expected to improve over coming quarters as the impact of GST fades and consumption picks up. This, along with a continued shift in household savings from physical to financial assets, bodes well for equity markets.

The current fall and any further weakness in the near-term provide a window of opportunity to enhance allocation to good quality stocks.

A few sectors that look attractive post the recent correction are as follows:

Information Technology:

The global growth outlook is improving, which in turn bodes well for the IT sector. We expect global IT spend, particularly in the BFSI sector that has led technology adoption, to increase as confidence improves. In India, rapid digitization is likely to continue to fuel spending on mobility, analytics, and Cloud.

The management commentaries have been upbeat, suggesting improving demand outlook. Moreover, the companies have been able to manage margins better through automation and efficiency gains. Lastly, in the wake of still stretched market valuations, IT sector valuations are fairly attractive, thereby providing a good risk-reward opportunity.

Private sector banks:

We remain positive on retail-focussed private sector banks as they have leveraged well on rising consumer affordability. Retail assets of private banks such as auto loans, personal loans, consumer durable loans, credit cards and housing loans have grown at a robust 20-25% rate which is likely to continue given low penetration levels.

Moreover, these banks have strong balance sheets and adequate capitalisation levels, thereby enabling them to participate in the impending capex cycle recovery, the signs of which are nascent at this stage.

Consumer Discretionary and Staples:

The consumer discretionary and staple companies have reported strong volume growth in the last quarter as demand has been gradually picking up.

The sector is expected to deliver steady growth over the next couple of years driven by 1) recovery in volumes led by the steady economic recovery, 2) government’s strong focus on rural sector with likely significant hike in MSPs and 3) implementation of 7CPC-related salary and pension increases by various state governments.

Moreover, consumer companies do have a fair degree of pricing power and thus, can increase prices to offset any increase in input prices.

Automobiles:

The auto sector has gained significant momentum over last six months. The implementation of 7th Central Pay Commission (7CPC) by the Centre and staggered implementation of pay hikes by states bodes well for four-wheeler and two-wheeler demand.

Moreover, with government’s strong focus on rural sector, with potentially significant MSP hikes this year, rural consumption demand is also expected to improve significantly, thereby improving sales of passenger vehicles and tractors.

Further, increasing disposable incomes and rising aspiration levels bode well for passenger vehicle demand, particularly given low penetration of 2% and 12% for four-wheelers and two-wheelers respectively.

Engineering & Infrastructure:

The infrastructure spending by Centre as well as State Governments has remained robust in high priority areas such as affordable housing, roads, railways, water as well as urban infrastructure.

The government has laid out an ambitious plan for road infrastructure development in the country via the Bharatmala scheme, entailing a total spending of Rs 5.3 lakh crores, providing visibility for projects over the next five years. Order inflows of infrastructure companies have picked up, thereby providing revenue visibility.

Within this sector, we like high-quality companies with good corporate governance, strong execution track-record, healthy balance sheets and superior return ratios.

MORE WILL UPDATE SOON!!

10 stocks with highest EPS growth potential in FY17-19 could give up to 40% return

Return on Equity indicates profitability of a company by measuring how much the shareholders earned for their investment in the company. The higher the percentage, the more efficiently equity base has been utilized, indicating better return to investor.

 

Hit by a global rout in equities post Budget, the S&P BSE Sensex plunged over 2500 points or little over 7 percent from its peak of 36,443 recorded last month. With such sharp fall in the index, many stocks have corrected 20-30 percent in the same period but are displaying strong growth in earnings.

After a period of flat earnings over FY14-17, we see a semblance of a recovery, with earnings growth estimated at 22 percent for 2HFY18 and 25 percent for FY19, Motilal Oswal said in a report. However, earnings from SBI, Tata Motors, Lupin and ONGC dented sentiment.

Earnings downgrade/upgrade ratio moderated QoQ in which 65 companies’ saw earnings cut of over 3 percent (58 in 2QFY18) and 43 companies saw earnings upgrades of over 3 percent (49 in 2QFY18). The upgrade/downgrade ratio weakened from 0.84x to 0.66x, said the report.

Markets will continue to give a premium valuation to businesses with high growth visibility, strong return on equity (ROE) and complemented by high standards of corporate governance, suggest experts. Investors should look at stocks which high earnings visibility in the next 1-2 years.

Future potential of the company is more important than past performance. However, an investor must first judge the capability of the management to en-cash on opportunities which lies ahead of them and projected by them.

Companies which are projected over a reasonably long period of time to generate above-average earnings growth and cash flows, supported by high ROE’s, will naturally command higher earnings multiples.

Return on Equity indicates profitability of a company by measuring how much the shareholders earned for their investment in the company. The higher the percentage, the more efficiently equity base has been utilized, indicating better return to investor.

A recent report by domestic brokerage firm highlighted 10 stocks which are displaying high ROE for FY18. The list includes stocks like Oberoi Realty, Rain Industries, Quess Corp, Hindalco, Tata Motors, Vedanta, Delta Corp, M&M Financial, Escorts, and Avenue Supermarts.

Motilal Oswal expects Hindalco to hit a target of Rs344 in the next one year which translates in to an upside of 40 percent, followed by Quess Corp which should give a return of over 30 percent, and Tata Motors which was a laggard in the last one year could see a rally of about 37 percent in the next 12 months.

The important differentiator which makes these stocks stand out is the EPS CAGR which has been growing at a healthy rate of 40-60 percent. The brokerage firm expects the rate to continue for the period starting from FY17-FY20.

EPS CAGR is an important driver to predict the future direction of the company. Companies with high EPS CAGR is considered as a good combination for predicting the future prices and movements of the company for valuation aspect. Some of Such companies are Oberoi Realty, Tata Motor, Hindalco and Quess Corp.

When you compare the EPS history with the stock price history, it helps you determine the most likely future direction of the stock price. CAGR is a much bigger factor which will add to a spike in prices. Growth is all we need. A company with great growth potential (CAGR) is considered as one step ahead of the company with High EPS.

What should investors do?

Investors who are looking for value at current levels even if the stock has corrected in double digits should go for companies which are showing higher earnings growth.

Apart from looking at ROE and PE multiple of the company one can adopt PEG (forward PE to Growth rate) ratio to arrive at a common metric for measuring company valuations to their projected growth rates.

As a simple illustration, a company whose PE ratio is 25 and projected earnings growth is 30%, would give a PEG ratio of 0.83 which would imply that the company is being valued at 0.8x its future growth rate.

Companies with high growth rates, merely applying the PE ratio alone may not be appropriate and the PEG ratio acts as a good common barometer. As a thumb rule, businesses with growth visibility and having PEG ratio of less than 1, would be considered to be reasonably valued and may be bought with a long-term perspective.

Companies with good management like Super Avenues Ltd. (DMart) and Titan Ltd. which demonstrate high visibility of future earnings growth and cash flows over a long period of time are seen to have higher PEG ratios.

However, some analysts say that too much excel sheet projections/forward earnings multiples are harmful for investors and a periodic review of investments is necessary.

Many times when current valuations are stretched, analysts try to justify them by quoting forward multiples which on the face of it suggests that current valuations are rich enough for one to be cautious.

Looking at one year forward multiple is still ok but going beyond that is an exercise of prediction in which majority fail.

MORE WILL UPDATE SOON!!

Nifty at a make-or-break point; top 3 stocks which could give up to 12% return

The current scenario is a make or breaks one for the Nifty as if the index cracks below the 10275 mark on a closing basis it would lead to a larger structural breakdown on the daily chart.

The Nifty50 went through wild moves in last hour of trades in an otherwise subdued F&O expiry day on Thursday. The Nifty just managed to hold above the important 10300-10275 support area.

It is not only above the February 6, 2018, lows but also corroborates with the rising trendline support zone. The current scenario is a make or breaks one for the Nifty as if the index cracks below the 10275 mark on a closing basis it would lead to a larger structural breakdown on the daily chart.

In fact, a Head and Shoulder pattern breakdown is on the cards for Nifty. However, giving some hope to the bulls, Nifty holding above the mentioned support area could aid the market to stage a meaningful recovery from current levels.

The Bank Nifty, on the other hand, has already broken down from its Head and Shoulder pattern on the daily chart. However, the index is just managing to hold above its immediate previous low of 24800 hit in early December which still gives a ray of hope for a meaningful recovery.

If the index slips below 24800, Bank Nifty is expected to further crack sharply. One should consider being cautiously optimistic at the current juncture.

Here is a list of stocks that deliver up to 8-12% returns:

Apollo Hospital Ltd: BUY| Target Rs 1397| Stop Loss Rs 1176| Returns 12%

The stock has been on a declining trend since hitting its all-time high of Rs 1532 in March 2016. However, in the last seven months, we have observed Apollo Hospital forming an inverse Head and Shoulder pattern on the weekly chats which is considered as a bullish pattern.

Finally, this week the stock broke above the neckline of the pattern which is a bullish sign. The price outburst has been accompanied by a healthy rise in traded volumes.

In addition to that, the relative strength index or the RSI also indicates that the current momentum is likely to extend further. Traders can look at buying the stock for a target of 1397 and a stop loss placed below 1176 levels.

Mindtree Ltd: BUY| Target Rs 810| Stop Loss Rs 811| Returns 9.5%

After consolidating for the past four weeks, MindTree has broken out from a Symmetrical Triangle pattern on the daily chart.

Every time, the stock corrected from highs, 21-DMA proved to act as a strong support zone. The volumes to have picked up sharply surpassing the 10-days average volumes.

In addition, we saw positive crossovers on multiple oscillators which is a positive sign. We expect the stock to rally higher towards its all-time high levels of Rs 810 in the medium term.

Biocon Ltd: BUY| Target Rs 671| Stop Loss Rs 597| Returns 8%

The stock has been trading in a very solid higher top higher bottom structure and has also been a stand out outperformer compared to the other pharma stocks.

The recent consolidation has been a healthy move and the stock has finally broken out from a declining channel pattern on the daily chart.

With volumes backing the current breakout, we expect the stock to rally higher towards its potential target of Rs 671 translating into 8 percent upside in the medium term.

MORE WILL UPDATE SOON!!

Short-term pullback to drive Nifty towards 10,570; 3 top stocks which give up to 12% return

Taking slightly contra view on index and expect Nifty index to see a short-term pullback from current level. Till the time Nifty is trading above 10033.35, the Higher Top Higher Bottom formation on weekly chart remains intact. On weekly charts, RSI (14), has signaled an oversold condition post the formation of a bearish divergence.

The benchmark indices extended the ongoing pessimism and the bears tried to break the recent swing low of 10,276 in early part of the week. However, bulls managed to defend this level and thereafter index eventually slipped into a consolidation.

Looking at the daily chart, we are taking slightly contra view on index and expect Nifty index to see a short-term pullback from current level. Till the time Nifty is trading above 10,033.35, the Higher Top Higher Bottom formation on weekly chart remains intact. On weekly charts, RSI (14), has signaled an oversold condition post the formation of a bearish divergence.

Also, on a weekly line chart, in the last two weeks Nifty precisely closed near its previous resistance zone of November 3, 2017. Hence, we are meticulously tracking  Friday’s closing as any close near or above 10,450 indicates that the index is poised for a sharp bounce. In that case, we may see Nifty to rally towards 10,575 and 10,640 levels respectively.

On the flip side, the above hypothesis will be negated if Nifty breaks and closes below 10,276 in that case possibility of testing the swing low of 10,033.35 can’t be ruled out.

However, the expected pullback will be short term in nature and we don’t advise traders to go aggressive long in Nifty. Rollovers figure suggest that heavy short positions have got rolled in March series and the way March series future premium have reduced in yesterdays session clearly indicates that at higher levels markets will remain under selling pressure.

Here are the lists of 3 stocks which can return up to 12%

Coal India: Rating: Buy around Rs 310-307 | Target: Rs 338 | Stop loss: Rs 297 | Time frame | 15-21 sessions | Return: 8%

After sharp run-up from the bottom of around Rs 262, the stock rallied till Rs 311. Subsequently, it slipped into consolidation which led to a formation of triangle pattern. Recently, stock confirmed its breakout from the said triangle pattern.

The stock saw acceleration in volume activity that support our hypothesis. The weekly Higher Top Higher Bottom formation indicates the primary trend is up. Hence, we recommend traders to buy this stock in a range of Rs 310–307 with price target of Rs 338 and stop loss placed below Rs 297.

Hexaware Technologies: Buy around Rs 350-345 | Target: Rs 394 | Stop loss: Rs 323 | Time frame: 15-21 trading sessions | Return: 12%

Recently, the stock has seen sharp profit booking and corrected till Rs 323. Subsequently, it saw decent consolidation and post that stock resumed its trend. On a weekly chart, the RSI (14) has indicated oversold condition. The Higher Top Higher Bottom formation is still intact. Hence, we advocate traders to buy this stock in a range of Rs 350-345 with a price target of Rs 394. Stop loss should be kept below Rs 323.

Tata Steel: Sell around Rs 640-644 | Target: Rs 590 | Stop loss: Rs 665 | Time frame: 15-21 trading sessions

Looking at the daily chart, stock failed to surpass its previous swing high of Rs 748 and took sharp turn from Rs 720. In the process, the daily chart formed a bearish head & shoulder pattern on daily chart. Currently, the stock is trading near the neckline of the pattern however the hourly chart indicates the possibility of further correction. Hence, we advice traders to go short in this stock with a price target of Rs 590. Stop loss should be placed at Rs 665.

MORE WILL UPDATE SOON!!

Stocks in the news: Union Bank, Bank Of India, Reliance Industries, Max India, Bank of Baroda, Dilip Buildcon

Union Bank | Bank Of India | Reliance Industries | Max India | Fortis | Weizmann Forex | HDFC | Bank of Baroda | Bank of Maharashtra | PNB and Dilip Buildcon are stocks which are in news today.

   

Here are stocks that are in news today:

Cabinet approves creation of National Urban Housing Fund for Rs 60,000 cr

Union Bank says that it classified Rotomac Global account as a non-performing asset in October 2016

Bank Of India

Gets shareholders' nod to issue fresh capital as tier-I/tier-II bonds for pref shrs for amount up to Rs 10,000 cr

Gets shareholders' nod to issue shares worth RS 6,975 cr to govt

Reliance Industries, Eros International PLC

Reliance invests in 5% stake of Eros for USD 48.75mn

To set up 1000cr corpus to produce content

Max India, Max Healthcare

Company’s equal JV, life healthcare group holdings ltd initiates preliminary discussions with company to explore possibility of acquisition of Life healthcare

shares in max healthcare institute limited by the company

Fortis

Promoter invokes pledged shareholding

Promoter holding falls from 8.85% to 5.87%

Weizmann Forex

Board had approved demerger of wind power biz in Oct 2017

Board has decided to pursue the demerger only post raising of funds through public issue/ private placement

Appointed date on 1st April 2018

HDFC disburses Rs28bn loans under Central scheme - BS

Liberty House submits bid for Bhushan Power - Livemint

Bank of Baroda says it has Rs 456cr exposure in Rotomac, account declared as NPA in Oct’2015 - ET

DGH may review plan to sell 60% stake in ONGC, Oil India fields - Livemint

Other stocks and sectors in the news

Bank of Maharashtra - ICRA revises ratings of various bonds

ICRA places rating on various bonds of PNB under watch with negative implications

Dilip Buildcon declared as L1 bidder for NHAI project worth Rs 380.07cr

MORE WILL UPDATE SOON!!

Bull's Eye: Buy Titan, Coal India, Hexaware, ABB, Jain Irrigation, Exide; sell IRB Infra

  

Remember these are midcap ideas not just for the day, but stocks that look attractive in the medium-term as well.

Top picks and analysis:

Buy ABB with a stoploss at Rs 1470 and target of Rs 1570

Buy Godrej Consumer with a stoploss at Rs 1039 and target of Rs 1091

Buy Titan Company with a stoploss at Rs 815 and target of Rs 861

Sell IRB Infrastructure with a stoploss at Rs 227 and target of Rs 212

Buy Ashapura Intimate Fashion with a stoploss at Rs 456 and target of Rs 504

Buy Interglobe Aviation with a stoploss at Rs 1249 and target of Rs 1330

Buy Exide Industries with a stoploss at Rs 206.8 and target of Rs 218

Buy Coal India with a stoploss at Rs 299.8 and target of Rs 321

Buy Jain Irrigation Systems with a stoploss at Rs 115 and target of Rs 128

Buy Polaris Consulting & Services with a stoploss at Rs 455 and target of Rs 520

Buy Karnataka Bank with a stoploss at Rs 128 and target of Rs 145

Buy Hexaware Technologies with a stoploss at Rs 328 and target of Rs 360

MORE WILL UPDATE SOON!!

Buy, Sell, Hold: PNB, Coal India among 4 stocks, 2 sectors in focus on February 21, 2018

PSU banks and IT stocks are also on investors’ radar on Wednesday.

  

Coal India

Brokerage: Macquarie | Rating: Outperform | Target: Rs 210

The global research firm said that the price-based auction would increase cost curve and benefit Coal India. Further, it believes there could be a record Q4 for this fiscal. The company should witness an all-time high EBITDA & should drive earnings upgrades, it said in report. Additionally, valuations at 6.7xEV/EBITDA FY20E makes risk-reward attractive.

Brokerage: Morgan Stanley

The global research firm said that from the company’s perspective, the key will be aggression in auction bids. Further, cost structure of these operations may be efficient relative to Coal India, it said, adding that still there could be a few years for mining to start.

Ambuja Cements

Brokerage: Credit Suisse | Rating: Underperform | Target: Raised to Rs 220

Credit Suisse said that it is cautious on the stock as demand trend is still weak. The stock is factoring in 3-yr upcycle whereas upcycle is yet to start, it said, adding that it has cut CY18 EPS estimate by 13% due to weak ASP.

Brokerage: Motilal Oswal | Rating: Neutral | Target: Rs 290

Motilal Oswal said that limited capacity addition could constrain volume growth. Further, volume is seen at CAGR of 5 percent over CY17-19. While it believes valuations appear expensive, it sees only 10 percent upside from current levels.

Brokerage: CLSA | Rating: Buy | Target: Rs 325

CLSA said that sharp sequential drop in unit costs is inexplicable and observed that some of the cost gains may not continue.

Punjab National Bank

Brokerage: Nomura

Nomura said that the alleged fraud highlights apparent flaws in PNB’s systems, controls, and audits. Further, the impact will not come only from write-offs, but also dilutions at low prices.

Hexaware

Brokerage: Credit Suisse | Rating: Neutral | Target: Raised to Rs 330

The global broking firm increased EPS estimates by 3-6% to account for Q4 results. Further, any potential stake sale by Baring could be an overhang, it said, adding that overall the company has good strategy execution, but have rich valuations.

IT

Brokerage: Nomura

Nomura said that over the last six years, tier-1 has not outperformed top end of Nasscom guidance. But it has retained its cautious stance on the sector and does not see material acceleration in growth in FY19.

Brokerage: Macquarie

Macquarie said that Nasscom’s FY19 guidance hints at marginal improvement. Further, it expects most large firms in India to grow at industry level in FY19. It expects headcount to remain lower than revenue growth rate.

PSU Banks

Brokerage: Nomura

The broking firm is positive on the sector and believes that worst of credit cycle is behind. Core PPOP performance for some banks will continue to improve. Having said that, nature of the alleged scam reduces our confidence level in PSU banks and recent developments may restrict a re-rating in the near-term. It expects operating performance of corporate banks to improve from H2CY18.

MORE WILL UPDATE SOON!!

March series seeing short rollovers; 3 stocks which could give up to 17% return

Short rollover to March series could lead to further selling pressure and long unwinding in coming trading sessions.

Since the inception of February series continuously we have seen selling by foreign institutional investors (FIIs) at higher levels which clearly indicates short buildup and discomfort in the market.

The initial rollover data towards March series also indicates a short rollover. In the expiry week, we have seen aggressive call writing in 10400 and 10500 call strike which indicates that current expiry is likely to close below 10400 levels.

Moreover, short rollover to March series could lead to further selling pressure and long unwinding in coming trading sessions.

The overall data has turned negative and more weakness can be seen moving forward. On technical front, next support is placed around 10200- 10220 levels for the Nifty

Here is a list of top three stocks which could give up to 17% return:

IZMO: BUY| Target Rs 127| Stop Loss Rs 98| Return 17%

The stock is consistently moving up in a rising channel on daily and weekly interval along with supportive volumes on every dip. This week profit booking has been seen in the stock as prices have retraced back towards its short-term moving averages once again.

On a shorter time frame stock has formed double bottom around 99 levels and bounce thereon. Now any move above 108 levels will confirm the next upside in prices moving forward. So, traders can buy the stock above 108 levels for the target of 127 with a stop loss below 98.

HCL Infosystem Limited: BUY| Target Rs 71.50| Stop Loss Rs 55| Return 17%

The stock has formed a cup and handle formation on daily charts and given breakout above the pattern formation last week to test 69 levels. This week once again prices have retraced back towards its breakout levels near 61 and took support at its short-term moving average.

At the current juncture, the positive divergence on secondary indicators like stochastic and Rsi suggest for next up move in prices. So, traders can accumulate the stock in a range of 60-62 for the upside target of 71.50 with a stop loss below 55.

TVS Srichakra Limited: BUY| Target Rs 4200| Stop Loss Rs 3350| Return 15%

If we look at broader picture stock has been continuously trading down from 4300 levels and tested its 100 days exponential moving average on a weekly interval.

Thereon stock has formed a cup and handle formation on weekly charts and given fresh breakout above the pattern formation to once again hold above its short-term moving averages.

Traders can accumulate the stock in a range of 3750-3650 for the upside target of 4200 with a stop loss below 3350.

MORE WILL UPDATE SOON!!

Top 4 stocks to buy in a volatile week which could give up to 11% return in short term

If Nifty see a close below 10350 in next few days then we may be going in for a deeper correction where price may see a downside move to 10100 - 9900.

  

The Nifty 50 ends down for the third consecutive day to close below 100-days SMA at 10,360. The Nifty has ended down for the third consecutive day which it hasn't done since the first week of January.

BankNifty also ended down to 24870 on the back of rising news of frauds in the domestic banking system that is surfacing since PNB scam was unearthed. The recent scam of Rotomac also added jitters to current developments.

Overall cues for the Indian equity markets remained negative on the back of sentiments that have developed in the last two weeks or so.

A complete underperformance by banking stocks and correction in some of the blue-chips also aided in the current correction. A rise in volatility from 13.5 to 17 levels validates the increasing range of market we may see going forward and directional traders.

The Nifty has closed below its 100-days moving average which is a bearish sign. In the next few days, we may see a trend that may be established since Nifty has respected the 100-days MA last two times it tested it and gave a follow up buying on the underlying trend, i.e. Bullish.

It will be critical to see if buying is returning to the market at lower levels to validate the internal strength. If we see a close below 10350 in next few days then we may be going in for a deeper correction where price may see a downside move to 10100 - 9900.

Though, momentum oscillators suggest an oversold market while it will be all line in the sand for Nifty at 10350 and a weekly close below or above it.

Top four stocks which could give up to 11% return in the short term:

Idea Cellular: BUY| Target Rs 93| Stop Loss Rs 80| Return 11%

The stock is trading in the oversold zone and is seeing a reversal in terms of the price structure. A double bottom formation at Rs81 odd levels coupled with a pullback in price seen in the last session suggests a short-term bullish structure that can take prices to Rs93. Investors can keep a trailing stop loss at Rs80

Coal India Ltd: BUY| Target Rs 330| Stop Loss Rs 295| Return 6%

It is one of the outperforming stocks in the oil and gas space which has been in a secular uptrend for the past few months. The recent consolidation seen at Rs290 - 310 levels makes it healthier for next move towards the projected target of 330.

The W pattern along with a flag breakout suggest its overall bullish nature. We suggest buying on dips for the upside target of Rs330 and a stop loss placed at Rs295.

NTPC: BUY| Target Rs 175| Stop Loss Rs 160| Return 7%

The stock is making a reversal pattern on the higher timeframe charts while a recent base building is seen in the stock on the daily chart with the consolidation of more than a week.

A reversal from the oversold zone can also be seen which can take prices higher in the short term with prices retracing to 175 - 177. We suggest placing a stop-loss placed at Rs160.

Infosys: BUY| Target Rs 1190| Stop Loss Rs 1110| Return 5%

The stock has breached its upward sloping trendline and ended its recent price correction from 1200 odd levels to 1100.

A retest of the point of polarity at previous breakout levels and a breakout from bullish continuation pattern suggest that it may see next round of bullish levels. We expect the technical target of the pattern at 1190 while stop loss can be placed at the recent bottom of 1110.

MORE WILL UPDATE SOON!!

Mutual fund Vs Ulip: Does LTCG on equities and MF make Ulips a better investment bet?

Long-term capital gains were tax free in the hands of the investor before Budget 2018.

   

Long-term capital gains are the gains arising from the transfer of the long term capital asset and long term is considered as a holding period of more than one year from the date of purchase.

There is a lot of buzz regarding long-term capital gains post Union Budget 2018. The apparent reason is that the union budget 2018-19 introduced “Long Term Capital Gains (LTCG) tax” for selling equity or equity mutual fund (MF) units or units of a business trust.

Contrasting Facts on Long Term Capital Gains:

Long term capital gains were tax free in the hands of the investor before this Budget. LTCG tax was abolished in the year 2004 to promote long-term investments and accelerate the participation of investors in the equity markets. It was then replaced by security transaction tax (STT). Only short-term capital gains were taxed at 15%, and long-term capital gains were tax exempt in the hands of the investor.

Now, after Budget 2018, investors have to pay 10% tax on the long-term capital gains on the profit reaped exceeding Rs 1 lakh from the sale of shares or equity mutual fund schemes retained for more than a year from the date of acquisition. Long-term capital gains up to Rs 1 lakh is exempted from taxation still. Additionally, the indexation benefit will not be applicable while calculating taxes as it was before. In the current regime, long term capital gain (LTCG) tax and security transaction tax (STT) both coexist which makes India probably the only country to levy these twin taxes.

The long-term capital gains earned till 31 January 2018 will not attract the proposed LTCG tax. It is also known as "grandfathered clause". The new taxation rules will be applicable from 1st April 2018.

Example: If an investor bought equity shares worth Rs 2 Lakh on 1st Jan 2016 and sold the shares for Rs Rs 3.6 Lakhs on 15th Jan 2018 (before 31st Jan 2018). The long term capital gain in this scenario is Rs 1.6 Lakhs. The applicable LTCG tax of 10% as per the current proposal will be for the capital gain exceeding Rs 1 lakh which is Rs 60,000 (Rs 1,60,000-1,00,000). But this will be tax free. However, with effect from 1st April 2018, the long- term capital gains will be duly taxed as the new laws.

Investor’s Dilemma

This tectonic change in the LTCG tax structure has brought disappointment to the investors who possess an adequate risk appetite to invest in equity markets. Investment in equity has been looked upon as the best avenue for the wealth creation beating the inflationary impacts. The retail investors who were dependent on dividends as a source of income are unhappy with this stinging move by the government. Investors take a higher risk by investing in equities to gain potential rise in the investment value. Such gains (either from direct trading or through mutual fund schemes) would shrink with the implementation of LTCG tax. Coexistence of STT and LTCG tax is more aching for the investor.

It could lead investors to move away from investing directly in equities or through equity mutual fund schemes to earn potential returns. Investors must introspect their investment portfolio and relook at their investment strategy towards a wealth building investment option with no tax incidence on the earnings from equity.

ULIP emerges as a tax exempted Investment Instrument

Another opportunity for the investors who are looking for an avenue to get returns through equity linked mechanism is “Unit Linked insurance plans” (ULIPs). The unit linked insurance plan is a combination of life insurance plus investment. ULIPs offer multiple fund options which allow the investor to choose between debt, equity or a mix of both for the investment as per his/her risk appetite for wealth creation. Investment options under ULIPs are similar to mutual funds, and an investor doesn’t have to pay LTCG tax, unlike Mutual Fund.

The catch here is that the gains from investing in equity through a unit linked insurance plan is exempt from LTCG tax as per the current regime which is a substantial pull factor in favor of ULIPs. ULIP enrich the investors with a bundle of additional tax benefits. Maturity proceeds under ULIP are tax exempted under section 10 (10 D) of the Income Tax Act (if the premium during the term of the policy is less than 10% of the sum assured). Also, the premium paid for ULIP is tax exempted up to the limit of Rs 1.5 Lakh under section 80 C of the Income Tax Act.

With the regulator’s intervention in the year 2010, ULIPs have been made more customer friendly with some overhauling changes such as capping the overall charges, extending the lock-in period from 3 to 5 years, hike in minimum life cover, etc.

ULIP being an investment cum insurance plan offers financial security in case of eventualities to provide financial support to the family members of the deceased.With its switching and redirection features, it allows the investor to transfer their funds from one fund to another based on market volatility to ensure optimum performance of the invested amount. Partial withdrawals can also be done under ULIP in the times of need which are again free from tax. ULIPs allows investors to boost their investments through loyalty additions which are additional units allocated at specified years before maturity.

Since ULIPs have a lock-in period of five years, it encourages investors for a long term investment tenure, which will be fruitful to attain higher returns fulfilling their medium to long term financial objectives.

In a nutshell, with the introduction of LTCG tax on equities, ULIPs have emerged as more tax-efficient and wealth creating investment tool for the investors looking for potential gains from equity holdings.

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