Rising interest rates & volatile stocks: Asset allocation to hold key in perfect storm

Here are a few interesting reads that will help you put your money matters in order in the volatile times.

  

After State Bank of India, the banker to the nation raised interest rates on bank fixed deposits, other banks are expected to follow. While the interest rates are expected to go up, investors are worried about the ongoing correction in stocks.  Experts ask them to stick to their asset allocation strategy and do not rush into selling off their investments or even going overboard with stock purchases.

If you are contemplating an investment in equity mutual funds and wondering if you should go for large cap fund or mid cap fund, here is a way out.  The experts point out that large caps are relatively attractively valued as compared with the mid-caps. Though the mid-caps are expected to deliver better returns, large caps stand to weather the storm better.

As we move towards the last fortnight of the financial year FY2017-2018, it is time to look at the pending works. If you have not filed your income tax returns for the previous year yet, do it now. Here are the tips to file your income tax returns.

If you have missed investing in tax saving funds or ELSS earlier this financial year, and you are looking to invest in tax saving funds with an intention to cut down income tax, here are a few things you must know.

Though most corporate entities showered the women with multiple benefits and discount offers on the Women’s Day. But that should not lead to a one day act. Women must take charge of their finances. Here is how they can draw their financial planning road map.

As we are closer to the current financial year, you may be considering a higher contribution towards voluntary provident fund. But do hold that thought for a moment. Here is a better option.

If you are a millennial and wondering what you should be doing with your money so that you can remain ahead of others, here are a few simple tips.

You should stick your asset allocation and keep investing as per your financial goals. While you work hard to earn to fund your financial goals. Do not forget to buy adequate amount of life insurance. In case of eventuality, the life insurance proceeds will ensure that the family’s financial goals are not compromised due to breadwinner’s absence. Here is how to utilise the proceeds received under a life insurance claim settlement.

MORE WILL UPDATE SOON!!

RBI may hike repo rate by 0.25% in 2018: Report

The Reserve Bank is likely to increase its key rates by 0.25 percent this year as inflation is expected to be at a higher range due to wide fiscal deficit and high prices of oil and farm produce

  

The Reserve Bank is likely to increase its key rates by 0.25 percent this year as inflation is expected to be at a higher range due to wide fiscal deficit and high prices of oil and farm produce, a report said today.

The headline consumer price inflation (CPI) will not breach the 6 percent mark which is the upper end of the target band for RBI, but a moderation towards the 4 percent target is also "unlikely", Care Ratings said in a report.

The main concerns today are on both the demand and supply sides," it said, elaborating that higher fiscal deficit is the main issue on the demand side, while the proposed higher MSP (minimum support price) of farm products, oil prices and house rent allowance are potential supply side threats.

A 0.25 percent hike in repo rate is expected during 2018. The key repo rate at which it lends to the system stands at 6 percent currently.

It can be noted that the RBI shifted its policy stance to neutral last year, after being in the accommodative phase for over two years. After rising to 5.21 percent in December, inflation cooled-down to 5.07 percent for January.

The RBI expects inflation to go up to between 5.1-5.6 percent in the first half of the next fiscal or the April-September period, before cooling down.

In its report, Care Ratings said that the picture on inflation will be clear only after the monsoon rains.

The agency said the market will not be spooked if the hike in policy rate comes in as it already seems to have factored it in.

The RBI had left the key rates unchanged in its last policy announcement in February, but cited risks on inflation which had led many to term it as a hawkish policy document.

MORE WILL UPDATE SOON!!

Our New Segment-----HOP ON------Start Minting Money-------

   

https://tradingcalls-indianmarketpulse.blogspot.in/

Top 20 FII heavy stocks which rose up to 200% in 2017 saw up to 60% cut in 2018

Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.

   

Indian market which was hitting record highs just in the first month of the year 2018 came under selling pressure soon after the Budget was announced and weak global cues too played a spoilsport.

Foreign institutional investors (FIIs) which remained net buyers of Indian equities to the tune of $8 billion in the year 2017 but have now turned net sellers in the month of February.

They poured in over Rs14000 crore in the month of January 2018 but turned net sellers in February as they pulled out over Rs12000 crore, SEBI data showed.

Plenty of stocks in which FIIs hold double-digit stake corrected up to 60 percent in the first two months of the year 2018.

It is not clear if FIIs were selling their stake but anecdotal evidence suggest that as many 46 stocks which more than doubled investors’ wealth in 2017 saw the correction of up to 60 percent in the year 2018.

Stocks like Vakrangee which rose 208 percent in the year 2017 saw a deep cut of 57 percent so far in the year 2018, followed by Jaiprakash Associates which rallied 222 percent, plunged 43 percent in a matter of just 2 months, and Forbes & Company rose 151 percent, saw a cut of 33 percent.

Other stocks which saw a double-digit cut include names like Unitech, followed by PC Jeweller, Future Consumer, Motilal Oswal, Jindal Stainless, Time Technoplast, Elpro International, Aegis Logistics, Adani Transmission, TVS Motor Company, DLF, Tata Global Beverages etc. among others, according to data from AceEquity.

  

Foreign institutional investors (FIIs) net investments in the month of February stood at Rs negative 12,000 crore largely on account of weak global cues and US bond yields rose to record highs which prompted global fund managers to shift some funds to bonds from equities.

The selling is likely to continue in the future as well, suggest experts. But, on a yearly basis, FIIs investment towards Indian equity markets should turn positive.

I think the selling will continue in the foreseeable future; we might see a rebalancing in FII portfolios allocating additional funds to developed markets as the emerging markets have gotten quite expensive.

With rising interest rates, fixed income is bound to yield a higher return adding further impetus for FIIs to invest in developed markets, the implementation of long-term capital gain tax will not help garner investments either.

Cues from global market suggest that flows from foreign investors will be less than what we saw in the year 2017 largely on account of what US Federal Reserve will do with respect to interest rates and rising bond yields.

US Fed has indicated an increase in rates for 2018, the direction of which will be set in meeting on 21st March. Increase in rates is definitely a negative event for foreign liquidity.

At the same time, it is also determined by country fundamentals, which are improving. Therefore, FII flow might not be completely negative for 2018.

MORE WILL UPDATE SOON!!

Use pullback rallies to exit longs; 4 stocks which could give up to 9% return

We expect a near-term bounce in the index; however, such bounce will not lead to a significant trend reversal and any up move towards 10400-10480 levels can be used to exit from trading long positions.

   

The Nifty resumed its downtrend after a broad consolidation and eventually took out the swing low of 10,276.30 in Tuesday’s session. This triggered further pessimism and the index nosedived sharply towards its next crucial support of 200-DMA which is seen around 10,130-10,140 zone.

In Thursday’s session, short covering was seen in banking and selected heavyweight stocks near the crucial support level of 200-DMA that helped Nifty to close above 10,200 levels.

The hourly momentum oscillators are trading well inside the oversold territory and are indicating towards a further pullback on the higher side.

We expect a near-term bounce in the index; however, such bounce will not lead to a significant trend reversal and any up move towards 10,400-10,480 levels can be used to exit from trading long positions.

At this juncture, 10,130 which coincides with the 200-DMA will act as an immediate support level for the index and if it trades below this level will drag index lower towards its weekly swing low of 10,033.35 which is a crucial support.

On the other side, 10,276 which was earlier acting as a strong support has reversed its role and is likely to act as an immediate hurdle above which the strong resistance is placed near 10,360.

Here is a list of top 4 stocks which could give up to 9% return in the next 15-21 sessions:

Reliance Industries Ltd: Sell around 920 – 925| Target 840| Stop Loss 960| Timeframe 15 to 21 sessions| 8%

On the weekly charts, the stock has formed a classical head and shoulder formation and is currently the right shoulder which is in the process of making.

The neckline of this pattern is pegged near 871 and any decisive move below 871 will eventually confirm the breakdown from said pattern. The weekly RSI (14) indicates the possible range shift.

The weekly Bollinger Band has compressed significantly hence volatility is likely to increase in the coming trading session. Therefore, we advocate traders to build a short position in this stock in a range of Rs920 to 925 with a price target of Rs840 and a stop loss placed above Rs960.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

Hindalco Industries Ltd: Sell around 225 – 230| Target 205| Stop loss 238| Timeframe 15 to 21 trading sessions| Return 8%

Looking at the weekly chart, the stock confirmed its breakdown from the Double Top pattern as the neckline of the said pattern was placed near 232.

Along with its Double Top breakout, the stock also broke below its 200-DMA which supports the hypothesis. On the daily chart, the stock closed below the upward sloping trend line drawn from the bottom of around 63.

Hence, we expect this stock to see further correction in the near term. We recommend traders to go short in a range of 225 to 230 with a price target of 205 and a stop loss placed below 238.

HUL: Sell around 1293 – 1300| Target 1225| Stop loss 1330| Timeframe 15 to 21 trading session| Return 5%

Looking at the daily chart, the stock broke the upward sloping trend line joining from the bottom of 1057. Also, the stock broke the higher top higher bottom sequence which doesn’t bode well in the near term.

The stock is trading well below the 89-EMA. Thus, we recommend traders to build a short position in a range of 1293 – 1300 levels with a downside price target of 1225 and a stop loss placed below 1330.

Cholamandalam Investment & Finance Company: Buy around 1415 – 1400| Target 1550| Stop loss 1360| Timeframe 15 to 21 trading session| Return 9%

Looking at the daily chart, the stock is trending in a rising channel formation and recently the stock precisely tested the lower band of the channel pattern and rebound sharply.

Also, Thursday’s low of 1392 coincided with the 50% of its previous daily swing low. Hence, we recommend traders to buy this stock in a range of 1415 – 1400 with a price target of 1550 and a stop loss placed below 1360.

MORE WILL UPDATE SOON!!

Thinking where to invest? These 3 sectors could hog limelight in 2018

Longer term metrics on the economy and earnings growth continue to remain positive.

   

We continue to expect elevated volatility levels in the equity markets and hence advise investors to look at equity allocations from a medium to long-term investment horizon.

Market sentiment is currently negative globally. Equity markets faced stiff headwinds largely from global factors this month. Local factors including the unearthing of the PNB frauds have also added to this negativity.

In our opinion, all of this is short-term in nature. Longer term metrics on the economy and earnings growth continue to remain positive.

Company results for Q3 FY 18 have seen significant improvement across sectors the highlight being a recovery in the consumer businesses and housing sector, both partly helped by the low demonetization base.

Consensus NIFTY earnings also did not see any negative commentaries, highlighting that there is confidence in a likely step-up in growth going forward. Improving GDP growth and back to back strong IIP numbers point to a revival in manufacturing.

We continue to expect elevated volatility levels in the equity markets and hence advise investors to look at equity allocations from a medium to long-term investment horizon. Systematic investments into equity products could also help investors ride out short-term volatility.

 The US hiking rates do raise costs of borrowing across the world since the US Dollar is the world’s reserve currency. Re-pricing of equity risk premia is likely to play its part in keeping markets volatile in the short term.

Fundamentally, India is looking at a trio of positive factors, Strong GDP growth, Revival of corporate profits and stable inflation.

If US 10-Years G-Sec trends and stays above 3 percent which very likely given higher inflationary pressures in next 12 months, the carry trade would likely unwind as the cost of money increases.

This would definitely have some indirect pressure/volatility on the Indian markets as FIIs re-allocate assets.

As a philosophy, we have consciously stayed away from PSU stocks especially PSU banks. Our philosophy consciously targets companies with strong earnings growth and sustainable business models.

These qualities in our opinion are key ingredients for long-term wealth creation. PSU banks currently do not offer these attributes and hence it’s not the core part of the portfolio.

The recent budget announcements relating to rural, agriculture and healthcare are positive for growth in general and for these specific sectors of the economy.

We continue to believe in:

a) Rural consumption story that is expected to play out over the next few quarters. We believe that rural centric policies are likely to be undertaken in the run-up to the 2019 general elections, which will bode well for rural spending for the next 12 to 18 months.

b) private banks are looking attractive

c) NBFCs who have strong ALM practices, Auto/ Auto ancillaries & the consumption basket. Many companies in this sectors also offer opportunities to play the rural themes.

Volatility is a friend of the long-term investor. While equity markets are volatile in the short run, they tend to follow earnings performance in the long run.

The Indian economy as highlighted above is the fastest growing large economy in the world. With the revival in the Indian corporate sector, the long-term potential of equities continues to look attractive.

Systematic investments offer a prudent yet simple mechanism for investors to ride the volatility. SIP’s help ride the downturns without investors facing the risks associated with timing the markets.

Asset allocation is critical to building a sustainable long-term portfolio. However, investors who do not understand financial planning should take professional advice rather than invest in an ad-hoc manner.

Investment advisors take a holistic approach to investing based on the risk profile and the investor`s goals keeping in mind the market environment. Each asset class offers its own set of merits and demerits and should not be ignored while building a financial plan.

Rising interest scenario is generally good for bank NIMs as loans get re-priced immediately with an increase in MCLR while deposit re-pricing happens with a lag.

Banks enjoy pricing power as demand for credit improves and hence are able to pass on any increase in the cost of funds. Also, rising interest rate scenario is backed by an increase in CAPEX - as of now brownfield CAPEX is happening while greenfield CAPEX is yet to pick up.

The minutes of the February MPC meeting reinstated the cautious approach as inflation uncertainty has increased.

Amid this increased uncertainty, possible closure of output gap with improved growth also appears to worry a few members. While the tone RBI policy earlier last month was neutral, the hawkish tones of the MPC minutes suggest a possible increase in interest rates in the H2 FY19.

MORE WILL UPDATE SOON!!

Should you bet on large-cap or mid-cap stock for better returns in current market?

Investors should adopt an asset allocation approach towards equities, with exposures across all categories.

  

Given the current market backdrop, investing needs to be done judiciously. Investors participating in equity markets are advised to adopt cautious approach during these challenging environment. Equity trend amid high volatility around mid-cap funds while large-cap, on the other hand, can be considered as less risky. However, the past trends show only slight variance between the returns generated by large-caps over mid-cap. Hence, a million dollar question arises – which equity savings category can be considered as less risk and provide high returns future earnings for investors? However, one cannot select a specific category of funds that offer exposure to equities while minimizing the risk element, but doing proper asset allocation can help them to do so.

Investors in the current market conditions can consider equity investments whether be it a large-cap or a mid-cap that aims to generate income by investing in bluechip companies or emerging companies to get higher returns. However, while looking at capital appreciation through moderate exposure in equity, one can also go for hybrid equity funds option too.

The equity saving funds endeavours to wrap three benefits together – income opportunity, the growth potential of equity and tax efficiency.

2017 was a fantastic year for Indian equities, particularly mid and small cap equities. Sensex delivered 27.5% in 2017, against 46% for BSE Midcap, and 58% for BSE Small Cap. The current trend of outperformance of mid and small caps over large caps has been continuing since 2013. One flip side of this trend is that we are seeing many investors falling into the behavioural trap of believing that this outperformance trend will continue forever, and they are allocating their money exclusively to mid and small caps. Looking at history, we can safely say that there is no indication that mid and small caps will always outperform large caps in the long run. In fact, since 2003 over seven-year investing periods, we see that mid and small caps outperform large caps in less than half of the observed cases.

Why large-cap?

In normalcy, the companies stocks with a market cap of Rs 20000 crore or more comes under the ambit of large-cap stocks.

Large caps and mid and small caps vary slightly in their attributes. In the large caps, since these are larger firms there is a relatively higher degree of revenue and profit certainty.

Large caps are less volatile than mid and small caps. Mid and small cap firms can offer elongated periods of high growth, but to access this high growth, these firms also take an inordinate amount of operational risks. In many cases, these operational risks do not pay off, and earnings suffer. With high earnings fluctuations, we also observe more volatile valuations and stock prices..

Why mid-cap?

In normalcy, the companies stock with a market cap of Rs 5000 to Rs 20000 crore comes under the ambit of mid-cap stocks. and the companies stocks with a market cap of Rs 1000 to Rs 5000 crore comes under the ambit of small-cap stocks.

Himanshu said that one of the benefits of midcaps stocks is that these firms are typically under-researched, and there is some alpha to be discovered from the quality stock selection. With SEBI’s reclassification mandate where fund managers will have to build the majority of their mid-cap exposure from a universe of 150 stocks, this stock selection alpha may get slightly constrained.

Looking at these reasons, we suggest investors adopt an asset allocation approach towards equities, with exposures across all capitalizations. Given the attractive relative valuations between large caps to mid and small caps, we prefer slightly overweight large caps at this stage relative to mid and small caps.

MORE WILL UPDATE SOON!!

Time to invest? Top 10 ‘safe stocks’ to buy after the 3000-point fall in Sensex

With the market correction of past 10 days, the stock prices of some of these PSUs have seen rough treatment, resulting in the possibility of healthy dividend yields, said the Centrum report.

  

The S&P BSE Sensex has plunged over 3,000 points from its record high of 36,443 hit on January 29, 2018, but there were plenty of stocks which managed to outperform the index by a wide margin.

The nervousness in the market is emanating from both global as well as domestic factors, but investors with a long-term horizon should not get scared with the correction. Indian market is still in a bull run and dips should be used to dip into quality stocks.

In the short term, global cues and their impact on liquidity will make Indian market volatile. But, back home strong long-term fundamentals of India, and liquidity support from domestic institutional investors are likely to cushion the fall if any.

“India has gone into a double whammy under the domestic and global headwinds. After a setback from Union Budget, the domestic market has shifted focus into the global volatility which is turning cautious due to premium valuation, increase in interest rate and risk of de-globalisation.

“The right strategy would be to churn your portfolio towards defensive sectors and reducing high beta stocks should be the key of the retail investors,” he said. In the short-term market may have a positive bias, during which the investors should consider to shift the portfolio into low beta.

Talking of stocks which can weather all storm are Dividend Yielding stocks. In the current economy, where bank fixed deposits offer interest rates to the tune of 6-7 percent, there are stocks which are giving dividend yields similar to that.

“Further, the interest on bank fixed deposits is taxable whereas the dividend from equity is completely exempt from tax (except when the dividend income in a financial year exceeds Rs.1 Mn),” Centrum Wealth Research said in a report.

“In that context, post-tax dividend yields of some of the stocks are way higher than the post-tax interest yield on bank fixed deposits. So, investors can consider some of the high dividend yield stocks to bring in regular inflows,” it said.

Based on the historical evidence, PSUs have been high dividend payers to address the fiscal deficit of the government to balance the tax collection shortfalls.

Some of the stocks such as Coal India have seen huge dividend payouts over the years. The fourth quarter of the financial year traditionally provides maximum activity in terms of PSU dividends.

Further, there was a huge drop in dividend payment by RBI to the government for its financial year ending June 30, 2017, owing to disinvestment at Rs 30,659 crore as against dividend of Rs 65,876 crore in the previous year. So, there may be dividend catch-up needed from other profit-making PSUs.

With the market correction of past 10 days, the stock prices of some of these PSUs have seen rough treatment, resulting in the possibility of healthy dividend yields, said the Centrum report.

MORE WILL UPDATE SOON!!

Buy, Sell, Hold: 6 stocks and 1 sector are on analysts’ radar on March 7, 2018

HCL Tech, Bharat Forge, Sun Pharma and financials sector are being tracked by investors on Wednesday.

HCL Tech

Brokerage: CLSA | Rating: Buy | Target: Rs 1,170

The brokerage house believes that the company is likely to see a growth recovery in IMS and said that apps & engineering are growing ahead of peers. There is a valuation discount to peers, which suggests that there are concerns on IP licensing strategy. Having said that, the firm offers absolute upside from growth & rerating, the report added.

USL

Brokerage: Morgan Stanley | Rating: Underweight | Target: Cut to Rs 3,250

The global research firm has cut FY18-F20 earnings estimates by 11-17% on account of weak Q3. At 43x F2020e P/E, risk reward appears balanced, it said, adding that amid uncertainty on the levy of GST on ENA, one could await a better entry opportunity.

Bharat Forge

Brokerage: Morgan Stanley | Rating: Equalweight | Target: Rs 659

Morgan Stanley said that NAFTA Class 8 Sales May Peak In 2018 With 26% Growth. Further, it sees a scope for decline in these sales by 5% in 2019 & 11% in 2020. Overall, it expects 30% growth in FY19/2018 NA truck exports.

Bharti Airtel

Brokerage: Nomura | Rating: Buy | Target: Cut to Rs 505

Nomura remains sanguine on earnings recovery In FY20. Further, deleveraging via asset monetisation should be another catalyst. At 7.4X, FY20 EV/EBITDA, stock is not cheap vs regional peers.

Sun Pharma

Brokerage: CLSA | Rating: Sell | Target: Rs 430

The brokerage house said that three observations for Halol related to deviation from certain ops & procedures. If the US FDA is satisfied with response, Halol plant could be upgraded to VAI. If upgraded, it would revive the approval cycle & warning letter

could be lifted.

In base case, it is building incremental revenue of $100 m/$150 m For FY19/20 From Halol, while in bull case it is building incremental contribution of $200 m/$300 m for FY19/20 From Halol. A delay in clearance beyond the estimated timelines could

delay US recovery.

Adani Ports

Brokerage: Goldman Sachs | Rating: Buy | Target: Rs 488

Higher containerisation & benefit of better connectivity will support growth, it said, adding that diverse geographic & cargo exposure limits potential impact from slowdown. The firm will continue to see market share gain, it said.

PSU Banks

Brokerage: Credit Suisse

Credit Suisse said bond hit will add to Q4 woes and over-ownership will weigh on earnings. It observed that PSU banks are staring at potential treasury loss of Rs 20,000 crore In Q4. The current 10 percent excess bond holdings are the highest in the last 12

years. It continues to prefer private over PSU banks.

NBFCs

Brokerage: Morgan Stanley

The firm observed that higher rates are here to stay and one must stick to non-bank NBFCs. It likes NBFCs structurally, but most will de-rate over the next year.

Banks

Brokerage: Jefferies

Jefferies continues to prefer private sector banks, especially corporate oriented ones. It is also positive on banks with greater moats around retail liability. It likes Yes, Axis, ICICI and HDFC Bank. It is perennially positive on HDFC Bank. Meanwhile, it said that private corp banks available at comparatively inexpensive valuations. Further, the Street is not pricing in recovery in earnings and is narrowly focusing on near term asset quality issues. It prefers private sector banks and said that valuation gap has opened up between SOE Banks & Private Sector Banks.

MORE WILL UPDATE SOON !!

Selling pressure may drag Nifty to 10,100; 3 stocks which could give up to 17% return

The overall data is still running negative for the markets and we can see further selling pressure coming into the market which can drag Nifty towards 10100 levels in coming sessions.

  

The Nifty 50 index hammered down badly after breaching the crucial support of 10,400 levels this week. The fall was majorly supported by banks after investigation deepened in the PNB fraud case.

Since the beginning of the series, we have seen call writers actively selling calls of 10500-10600 and 10700 strikes which clearly indicates discomfort in the market.

The derivative data indicates that selling pressure on higher levels may remain intact with Nifty having major resistance now placed at 10,400 and 10,500 levels.

As far Bank Nifty is concerned the next support is placed at 24,200 spot while resistance is placed at 24,700 and 24,800 levels.

The overall data is still running negative for the markets and we can see further selling pressure coming into the market which can drag Nifty towards 10,100 levels in coming sessions.

Here is a list of top three stock ideas which can give up to 17% return:

Bharat Bijlee Limited: BUY| Target Rs 1870| Stop Loss Rs 1480| Return 14%

After taking a support at its 100-days exponential moving average (DEMA) on the daily charts, the stock has risen sharply in the recent past to reclaim the levels above its short-term moving averages.

On the daily interval, the stock has formed an inverted head and shoulder formation and has also given a pattern breakout above the neckline last week.

The breakout in prices happened with marginally higher volumes which suggest for more upside in prices moving forward. Traders can accumulate the stock in a range of 1630-1660 levels for the target of 1870 with a stop loss below 1480.

V-Mart Retail Limited: BUY| Target Rs 2110| Stop Loss Rs 1625| Return 17%

The stock has been consistently trading higher and has been forming higher highs and higher lows on the daily and weekly interval charts.

At the current juncture, the stock has formed an inverted head and shoulder formation on the daily charts and also given a pattern breakout above the neckline placed at 1700 levels.

Additionally, positive divergences in the secondary indicators like stochastic and RSI also support the next up move in prices. So, traders can accumulate the stock in the range of 1800-1835 for the upside target of 2110 with a stop loss below 1625.

Gujarat Ambuja Exports Limited: BUY| Target Rs 306| Stop Loss Rs 250| Return 13%

The stock has been trading higher on the daily charts since the beginning of 2018 and tested its 52-week high last week. Additionally, the stock has formed a bullish flag formation on the weekly interval and given breakout above the pattern last week.

This week prices have retraced toward 260 levels on the back of profit booking. However, any break above the 270 levels will once again support the next upside move in prices as suggested by momentum indicators.

Traders can buy the stock above 270 levels for the upside target of 306 with a stop loss below 250.

MORE WILL UPDATE SOON!!

Top five sectors which are looking attractive post recent correction

As attractive as PSU banks may seem, we would recommend sticking to private banks i.e. if one wants to invest in the banking space.

 

The selloff by foreign investors (FIIs) that we have witnessed in the recent past is expected to be offset by the liquidity flows into equities from the domestic household savings. We believe that as long as this remains strong, volatility should remain curbed to a large extent.

However, given the high expectations from the earnings – as gauged by the higher multiples that the markets are garnering – as well as the many state elections lined up this year; we expect 2018 to be fairly volatile.

The year will not be anything like 2017, where we saw a run up across the board. A stock specific approach is the way to go.

A good way to have sector-wise allocation would be to mimic the benchmark indices – such as the Nifty 50 or the BSE – 100 or 200 indices.

As attractive as PSU banks may seem, we would recommend sticking to private banks i.e. if one wants to invest in the banking space.

We remain positive on the agri/ rural plays, consumption themes, housing theme as well as the infrastructure space.

A lot more information would be required (such as already existing investment and savings profile, the lifestyle of the investor, the risk appetite, his knowledge on equity investing) to answer such a question.

Let us go with the assumption that the candidate mentioned above has no savings, we would recommend a staggered approach towards investing in equities rather than investing all the amount in one go.

By the end of one year, the investor should have at least 30-40% of his money in fixed income and the balance split between MFs and equities (direct).

While banks will look to pass on the prices, keeping a gauge on the asset quality will be critical.

MORE WILL UPDATE SOON!!

Use pullback rallies to short Nifty; 3 stocks which could give up to 11% return

We expect any bounce back to be mild and short-lived since any retracement will be utilized by lead players who will further jump and cap upside.

  

The Nifty gave a decisive breakout of a Flag pattern that was in place for a month, coupled with negative domestic cues that aided the sentiments of bears.

After a month, consolidation came to an end with this breakout as Nifty hits a fresh low of 2018 and closed at the lowest level in 10,249 on Tuesday. The Bank Nifty followed the path with a decisive break and ending down at 24,448 after hitting a low of 24,362.

A lot of cues, fundamentally or economically, affected the market and primary bulls in the last few weeks. It started off with the global sell-off, correction, and as soon as Nifty was trying to form a base, we witnessed a Banking scam which is widespread to other banks tanking the PSU bank Index more than 20 percent.

Further, a trade war recently announced to fetch a favorable deal in NAFTA further fueled the heavyweight sector like metals which bend down to bears tune.

While in due course of time all the good news related to GDP, PMI and IIP have been absorbed on the domestic front. A flag pattern breakout is seen on the daily chart. It is a continuation pattern out of which we have seen a breakout in a favorable direction of previous swing, bearish.

The flag pattern is a very reliable pattern and thus further indicates the momentum may continue, as we earlier mentioned, towards a deeper cut in prices.

Secondly Nifty has been below its short-term moving averages (MA) and this time it is below its crucial 100-day MA which it was long-standing for a year.

Thirdly, we also see two heavyweight sectors like banking and metal in stress due to recent news flow. While on flipside, the currency market is showing a weakness in rupee, which will further aid overall bearish scenario in coming sessions.

We expect any bounce back to be mild and short-lived since any retracement will be utilised by lead players who will further jump and cap upside. We maintain sell on any rise strategy for lower targets of 10,050 - 9,850.

Here is a list of top three stocks which could give up to 11% return in the short term:

Biocon Ltd: BUY| Target Rs 660| Stop Loss Rs 610| Return 4%

The stock is seeing some bit of consolidation after the recent upward move while a bullish continuation flag is seen which provides an opportunity to rise the primary trend for an upside target towards Rs660 while a stop loss can be placed at Rs610.

NTPC Ltd: BUY| Target Rs 173| Stop Loss Rs 158| Return 6%

The stock is seeing a bottom formation on the daily chart as its trying to reverse from an oversold territory.

The oscillators that gauge momentum are displaying a bullish momentum and a positive divergence that may keep price upward in short-term with a retracement to Rs173 while a stop can be placed at near support of Rs158.

Godrej Consumer Products Ltd: BUY| Target Rs1210| Stop Loss Rs1055| Return 11%

Godrej has given a bullish breakout as per candlestick patterns after a decent pullback in price. On the chart, the trend is positive with prices making higher high and low while volume has also seen a surge in prices coming out of consolidation.

We expect the momentum to continue with next resistance at 1210 while a near-term support at 1055 can be seen as a stop.

MORE WILL UPDATE SOON!!

Brace for volatility in 2018; prudent to follow bottom-up approach: Emkay’s Karwa

Karwa attributes current fall in the market to weak local environment which involves the PNB bank scam, along with global challenges such as hardening of interest rates.

  

The year of 2018 has not been a great year for the market so far as frontline indices have reported negative returns. This especially becomes significant when compared to the stellar returns seen on the Street in 2017.

Experts at Emkay Global believe that the story is not over yet as investors must brace for a volatile year ahead.

At the base of it, our markets were heavy in terms of valuations and a market needed a reason too, and these factors gave the impetus.

Current fall in the market to weak local environment which involves the PNB bank scam, along with global challenges such as hardening of interest rates. Additionally, investors are looking to take their profits off the table in areas where they have made money.

So, it would be prudent for investors to have a strong bottom-up approach, he said, adding that look out for stocks which are undervalued and have strong earnings growth.

Trends for the fourth quarter also reveal that they are on the right track. Having said that, factors such as interest rates hardening could limit the upside on stocks despite good earnings.

In the auto space, he said that two-wheelers and four-wheelers continued to perform well.

Meanwhile, among infra names, ports and roads, among others, offer good opportunities for investment.

For financials, he believes PSU banks can be an opportunity from 12-18 months perspective, but one has to be cautious on a sector such as NBFC on the valuation front. In the long term, there may be opportunities in this space.

Lastly, on the pharma sector, he highlighted how most issues with US FDA are softening. Many companies are reworking their business model. Possibly in 12-18 months, you could see opportunity for patient contra investors..

MORE WILL UPDATE SOON!!