RBI monetary policy: 6 things to watch out for on Wednesday

The central bank has maintained the status quo on its repo rate since August 2017, citing concerns about inflation.

  

The Reserve Bank of India's Monetary Policy Committee (MPC) is meeting for its second bi-monthly policy review in FY19. This is the first time the committee is meeting for three days instead of the regular two days.

Some experts expect the MPC to revise the benchmark repo rate upwards. Repo rate is the rate at which banks borrow short-term funds from the RBI.

Here are 6 things to watch out for in Wednesday's monetary policy announcement:

Change of stance

Observers feel that the MPC may shift its stance on liquidity to hawkish from being neutral earlier. This could be in preparation for a hike in August, if rates are not hiked on Wednesday.

Experts are expecting a higher probability of key repo rate remaining unchanged at 6.00 percent, and a shift in stance from 'neutral' currently to 'withdrawal of accommodation' by the MPC.

The central bank has maintained the status quo on its repo rate since August 2017, citing concerns about inflation.

GDP growth

The Indian economy grew at 7.7 percent in the January-March quarter and helped India retain the tag of the world's fastest-growing economy. In its previous meeting, the committee had noted that the economy was expected to grow at faster pace in FY19 due to several factors.

Inflation

RBI's commentary on inflation will be watched closely on Wednesday. Observers are expecting the central bank to revise consumer inflation projections.

View on rising fuel prices

The MPC is expected to talk about the escalating prices of petrol and diesel, caused by the global increase in crude oil prices.

MPC voting pattern

In April, the RBI Deputy Governor Viral Acharya had indicated that he would vote to withdraw monetary accommodation in the next policy. Michael Patra had voted in favour of raising the repo rate.

The others had overruled Patra by voting to maintain the status quo. It would be interesting to see how the MPC members vote on Wednesday.

Views on US Fed rates

RBI Governor Urjit Patel said on Monday that the US Fed should reduce the pace at which it is unwinding its balance sheet, in order to limit the impact of a shortage of the dollar in emerging markets.

Patel said that the Fed should carefully adjust the pace, keeping in view evolving macroeconomic conditions.

The committee's observations on the US Fed's decisions on interest rates will be another thing to watch out for in Wednesday's policy announcement.

MORE WILL UPDATE SOON!!

Top 10 stocks which could get impacted the most if RBI goes for a rate hike

A rate hike is something which might not be taken in a positive light by most of the sectors.

  

Mark participants are eyeing the outcome of the Reserve Bank of India's Monetary Policy Committee (MPC). The Street has more or less discounted a rate hike of 25 bps and a change in stance by the central bank.

This is the first time the committee is meeting for three days instead of the regular two days. Some experts expect the MPC to revise the benchmark repo rate upwards from current 6 percent.

Repo rate is the rate at which banks borrow short-term funds from the RBI.

Observers feel that the MPC may shift its stance on liquidity to hawkish from being neutral earlier. This could be in preparation for a hike in August if rates are not hiked in the June meeting.

A rate hike is something which might not be taken positively by many sectors. Stocks in sectors like consumption, consumer durables, banking and real estate will be impacted the most, along with rupee and bond market.

The impact of rate hike by the RBI (if not in June then in the August meeting) will just hit the sentiment of the inventors. As said earlier, if RBI becomes more hawkish, there will be an impact on all the sectors; however, the intensity of the impact will be different. Sectors such as Banks, FMCG infrastructure, real sector and automobile, to name a few, are expected to see some impact.

A rate hike in coming months, if not in June, seems inevitable as global central banks, be it the US or other emerging markets are on interest rate hiking trajectory. Obviously, hike in interest rate by RBI would impact banks’ lending, capex, rupee and bond markets.

Aggarwal further added that a rate hike is unlikely to immensely affect lending rates, because banks such as SBI, HDFC, and Axis Bank have raised borrowing costs even before any central bank action.

Rupee, which has been witnessing downside trend, may get a relief from the rate hike. Off late, Indian bond markets have witnessed its worst selloff where FIIs were smart enough to pull out money and place it in other Asian economies like Indonesia and Philippines, suggest experts.

A 25 basis points rate hike in August is more or less discounted in the bond market hence, only a higher than 25 basis points (bps) hike will trigger fall in bond market considering this an unusual and aggressive stance by the Reserve Bank of India.

Rupee has been moving largely due to demand-supply factors, it has a good integration and correlation with the bond market. The fall in rupee is more related to crude and gold prices than rate hike by RBI at this moment.

Commenting on sectors in specific Mittal said, a rate hike would hit demand for two-wheelers, credit demand for the banking system and realty will become unattractive due to rise in lending rates.

We have collated a list of ten stocks from different experts which are likely to get impacted the most by a rate hike by the Reserve Bank of India (RBI):

DLF & Indiabulls Real Estate:

As real estate stocks are directly impacted by a rate hike and are considered as most sensitive ones to the changes in key rates stocks like DLF and Indiabulls Real Estate will be impacted in a negative way slowing down the growth rate.

The cash flow of DLF remained weak and there was also a major change in the profit of March’18 which came at Rs.37.7 crore as compared to Rs.4110.2 crore in December 2017.

Axis Bank:

The results of Axis bank were not impressive as the Gross NPA rose to 6.77 percent of the total loans at the end of the March quarter, from 5.28 percent in December.

The net NPA ratio worsened to 3.4 percent from 2.5 percent sequentially. And, now the rates are expected to increase it would be very tough for the stock to sustain at the current market rate.

State Bank of India:

SBI also gave negative results for the quarter ended March. The asset quality worsened because of fresh slippages which shot up to approximately 7.2 percent. The country’s largest bank reported a second consecutive net loss of Rs 7,718 crore for the March quarter, primarily due to a surge in provisions and bad loans.

IndusInd Bank:

The gross non-performing assets rose 14 percent sequentially in absolute terms to Rs 1,705 crore. Provisions for bad loans also increased to Rs 335 crore in March quarter, compared to Rs 236.2 crore in the previous quarter.

Hero MotoCorp & TVS Motor:

Both the two-wheeler names depend on finance to boost sales. Most of the two-wheelers are bought on finance and hence any increase in interest rate will certainly lead to lower sales.

Indiabulls Housing Finance & DHFL:

Housing EMIs forms a large portion of household spend and thus new consumers will certainly defer their decision of buying a home in case of a rate hike.

Indiabulls Housing & DHFL has grown at a very fast pace in recent years and rate hike will certainly put brakes on advances growth for the company.

L&T:

The company is the largest EPC player in the Indian infrastructure space. If RBI hikes interest rates than we may see a slowdown in the infrastructure sector and will result in drying up the new order wins for L&T.

Market is haemorrhaging, but Sensex & Nifty seem to suggest rude health

The big indices have retreated just 5-6 percent from their peaks, but the price damage in mid and small cap shares has been severe.

  

Many investors would be surprised to see the erosion in their portfolios despite the Sensex and Nifty not being too far from their lifetime highs. The big indices have retreated just 5-6 percent from their peaks, but the price damage in mid and small cap shares has been severe.

Here are some data points that describe the carnage in the market on Tuesday, June 6th. During the day, trading in 381 stocks on the BSE was frozen after there were only sellers in those stocks. Nearly 700 stocks, or one in every four stocks are trading within 5 percent of their 52-week lows. Sector indices that are close to their lows are power, telecom, infrastructure, utilities, healthcare and public sector undertaking.

There are various reasons why many these stocks are being hammered. In many cases, weak fundamentals are to blame. But market players say the recent policies and regulations by the government and market regulator SEBI are aggravating the situation.

The introduction of long-term capital gains tax from February 1 had many investors rushing to book profits mainly for tax considerations. Soon after, mutual funds began selling shares of smaller companies because the regulator introduced a new system of classifying stocks bought in the various schemes. Last week, SEBI tightened margin requirements to curb speculation and this has resulted in a new round of selling.

The retail investor is left wondering if the regulator is there to save them, who will save them from the regulator.

For someone who follows only the Nifty and Sensex as a gauge of market sentiment, the meltdown is not visible. A handful of stocks are giving the impression that all is well in the Indian markets.

The top five stocks in Nifty 50 account for a third of the market capitalization of the indices. Around 15 stocks have a weight of less than 1 percent of the index. In other words, the indices are like a Doberman, which will not be affected much even if the tail is chopped off. Nine of the top 10 stocks are trading close to their 52 week high levels. The only high market cap stock which is away from their highs is SBI.

An index is supposed to reflect the health of the market. Our indices are currently so skewed that they do not reflect the sickness that has spread to most of the market.

The purists might say that it is the nature of the beast where the top companies in terms of market capitalization will account for the bulk of the weight of the index. The index is expected to represent the health of a major portion of the market, but this is nowhere near the truth.

It is like taking a financial health of India by looking at the net-worth of top 10 richest Indians. For the common Indian, like a market investor, this is not even funny.

MORE WILL UPDATE SOON!!

See Nifty trading in a 10,200-11,000 band in June series

On the daily chart, immediate support for the Nifty is placed around 10,537 (50-day daily moving average) and 10,440 levels (50 percent retracement of its March to May upmove), whereas 10,699 (23.6 percent retracement of its March to May upmove) will act as immediate resistance.

  

The Nifty ended Tuesday highly volatile session on a negative note at 10,593.15, down 0.33 percent. Bears continued to exert pressure on domestic markets in the early noon session ahead of the Monetary Policy Committee meet.

Market sentiments remained weak with Commerce and Industry Minister Suresh Prabhu’s statement that unilateral trade restrictive actions by some developed countries could derail the fragile global economic recovery, which in turn would have implications on the job scenario.

Besides that, the BSE placed additional surveillance measure on numerous midcap stocks, which led to a sell-off in smallcap and midcap stocks.

On the daily chart, immediate support for the Nifty is placed around 10,537 (50-day daily moving average) and 10,440 levels (50 percent retracement of its March to May upmove), whereas 10,699 (23.6 percent retracement of its March to May upmove) will act as immediate resistance.

The relative strength index (RSI) on the daily chart is placed at 48.25 which is showing a downward momentum. Moving Average Convergence Divergence (MACD) is trading above the zero line with a negative cross, which indicates that the bias could remain bearish for the next few trading sessions.

India VIX ended down 4.09 percent at 13.31. A decrease in VIX suggests limited downside and a consolidated upmove in the market.

On the options front, maximum call open interest of 45.51 lakh contracts is seen at strike price 11,000, followed by 10,700, which now holds 33.89 lakh contracts. Maximum put open interest of 35.68 lakh contracts is seen at strike price 10,200, followed by 10,600 which now holds 34.76 lakh contracts.

As per the options data, immediate support is seen around 10,600 and 10,200 levels, whereas immediate resistance is seen around 10,700 and 11,000, which will act as stiff resistance in the June expiry.

Here are two stocks which could give 4-10% return in the short term:

Sanofi India Ltd: Buy| Close: Rs 5,068.35 | Target: Rs 5,335 | Stop loss: Rs 4,880 | Return: 10.89%

The stock has given a breakout above its downward trend line around Rs 5,038-5,045 levels on Tuesday on the daily chart which suggests bullishness in the stock.

A daily momentum indicator Relative Strength index (RSI) reading at 63.32 level, showing positive momentum and MACD trading above zero line with positive crossover whereas (+) DI continuously trading above (-) DI.

Based on the above observations, the trader can buy the stock around in dips around Rs 5,040-5,050 with a stop loss below Rs 4,880 (closing) for the target of Rs 5,335

Axis Bank Ltd: Buy| Close: Rs 530.90 | Target: Rs 510 | Stop loss: Rs 551 | Return: 4.85%

The stock has given breakdown from symmetrical triangle pattern around Rs 536-537 on Tuesday in the daily chart with moderate volumes.

The Daily Relative Strength index (RSI) breakdown its 21 days average and showing downward momentum and MACD trading with a negative cross above zero line, which indicates that stock likely to move downward further.

A trader can sell the stock after some technical bounce around Rs 536-538 with a stop loss above Rs 551 (closing) for the target of Rs 510.

MORE WILL UPDATE SOON!!

Avoid averaging stocks that are hitting 52-week lows: Axis Securities

For the week, Axis Securities expects the index to trade in a 10,550-10,820 range.

  

On the weekly chart, the index has formed a Doji candlestick formation, indicating indecisiveness among market participants regarding the market’s direction. Since the past seven weeks, the index has been consolidating within the 10,500-10,820 range, which represents a short to medium term sideways trend.

Any decisive breakout on either side will provide direction to the market. The chart pattern suggests that if the Nifty crosses and sustains above 10,770 levels, then buying interest would lead it towards 10,820-10,900 levels. However, if the index breaks below 10,640 levels, then it would witness selling which could take it towards 10,500-10,550 levels.

The Nifty is well placed above its 20, 50 and 100-day simple moving average (SMA), indicating positive bias in the short term. It continues to remain in an uptrend in the short term, so buying on dips continues to be our preferred strategy. For the week, we expect the index to trade in a 10,550-10,820 range.

 The rollover cost in May series stood at 0.09 percent as compared to 0.3 percent in the previous expiry, which indicates that most short positions have been rolled over while long positions have not been rolled over. Highest call open interest addition was seen in 11,000 strikes, which is likely to act as a hurdle on the higher side. At the money put 10,600 saw OI on the first day of the June series which indicates that we may break below 10,600 before moving up.

 If we look at the overall market, stocks in select pockets are performing well and the index is holding up because of heavyweights like HDFC Bank, Infosys, Mahindra & Mahindra, Bajaj Finance and Ashok Leyland. Most stocks are under pressure and have faced significant corrective action as they failed to meet market expectations on their quarterly result.

Investors should not average stocks that are hitting 52-week lows at the current juncture. Looking at the macro picture, we feel there would be more short term downside in these stocks. We are advising investors to book profits in stocks that are hitting 52-week highs as we expect some profit-booking and consolidation in the market going forward.

 Midcap and smallcap stocks generally perform in a healthy market. In the last two months, we are witnessing high volatility due to domestic and global cues which is creating uncertainty among investors. We believe smallcap and midcap stocks are likely to underperform for some more time, so booking profits on rallies would be advised..

 Please share 3-5 positional calls that could offer handsome returns to investors in the next 1 month?

A) Here is a list of top three stocks that could offer 6-7% returns in the next one month:

Torrent Pharma Ltd: CMP: Rs 1,438| Buying Range: Rs 1,430-1,400| Target: Rs 1540| Stop loss Rs 1375| Return 7%

On the weekly chart, the stock has observed a ‘Down Sloping Trendline’ breakout at Rs 1,420 on closing basis which signals a change of trend towards the upside.

This breakout is accompanied with high volumes indicating increased participation. The stock is currently trading above all its crucial SMA i.e. 20, 50, 100. The RSI and Stochastic are also in the positive terrain.

BPCL: CMP: Rs 408.55| Buying Range: Rs 408-400| Target: Rs 430-437| Stop loss: Rs 391| Return 7%

BPCL has given a downward sloping trendline breakout at Rs 400 which was also the immediate acting resistance in the stock and went on to make a high of Rs 411.50 on a closing basis.

The stock is witnessing high volume along with the support placed at 20 and 50-days SMA. The momentum indicators are also signaling a positive probability towards the bullish momentum in the stock.

Godrej Consumer Products: CMP: Rs 1,163.90| Buying Range: Rs 1,163-1,145| Target: Rs 1,230| Stop loss: Rs 1,115| Return 5.6%

Godrej CP has given the breakout from its last five weeks consolidation range of Rs 1,150-1,070 on the weekly closing basis. This breakout is accompanied with high volumes indicating increased participation.

The stock is forming higher top higher bottom formation on daily/weekly charts indicates sustained uptrend. The strength indicators are in positive territory which indicates positive momentum to continue further.

MORE WILL UPDATE SOON!!

Top 10 expert moneymaking ideas for the short term

The Nifty closed last week with a positive bias, but below its crucial level of 10,700, which suggest that bears are not ready to give up yet. The index is likely to consolidate in a range in June series as we head towards two crucial events: Monetary Policy Committee and US Federal Reserve policy meetings.

  

Investors are advised to remain cautious and watch out for two levels: 10,770 on the upside and 10,550 on the down. A breach of either could lead to a breakout or a breakdown. Until then, it is best if investors can remain stock-specific.

The index has made an indecisive pattern - Spinning Top - on the weekly chart and registered a Doji kind of formation on the monthly chart.

Since the past seven weeks, the Nifty has been consolidating between 10,820 and 10,500 levels, representing a short to medium term sideways trend.

Any decisive break on either side will provide direction to the market. The chart pattern suggests that if the Nifty crosses and sustains above 10,770 levels, then it would witness buying interest which would lead the index towards 10,820-10,900 levels.

If it breaks below 10,640 levels, he sees the index heading towards 10,550-10,500 levels. For the week, we expect the Nifty to trade in the range of 10,820-10,550 with a mixed bias.

Here is list of top 10 expert stocks ideas that could return 3-14 percent in the next 1-2 months:

Ujjivan Financial Services Limited: Buy| Target: Rs 450| Stop loss: Rs 365| Return 14%

The stock closed at Rs 393.80 on 1st June, 2018. It made a 52-week low at Rs 285 on 4th August 2017 and a 52-week high of Rs 434.75 on 11th May 2018. The 200-days exponential moving average (EMA) of the stock on the daily chart is currently placed at Rs 373.66.

Short term, medium term and long term bias is looking positive for the stock as it is comfortably trading above 200DEMA. Moreover, it is likely to form an “Inverted Head and Shoulder” pattern on weekly charts which is bullish in nature.

Apart from this, the technical indicators such as RSI and MACD are also suggesting buying for the stock. Therefore, one can buy in the range of Rs 385-389 levels for the upside target of Rs 440-450 levels with a stop loss below Rs 365.

Pfizer: Buy| LTP: Rs 2,565| Target: Rs 2,855| Stop loss: Rs 2,405| Return 11%

Among all the pharma stocks, this stock has performed very well during the last few sessions. On the daily chart, the prices are above the 20-DEMA indicating a strong trend in the coming sessions.

Further, the 'RSI' on the daily chart is in an upward direction which indicates a positive bias. Also, on the weekly chart, prices have taken a strong support at 10-DEMA which indicates an uptrend.

In addition, if we try to analyze ‘Bollinger Bands’ it clearly reflects bullish stance on the counter. Considering all the above scenarios, we recommend buying this stock at current levels for a target of Rs 2,855 over the next one month, and a stop loss should be fixed at Rs 2,405.

KPIT Technologies Ltd: Buy| LTP: Rs 285.75| Target: Rs 319| Stop loss: Rs 266| Return 11.6%

On the weekly chart, the stock price is trading well above the 10-DEMA & 50-DEMA which reflects a positive bias. The stock is trading near its all-time high which shows its outperformance in the recent market turbulence.

Prices have resumed its uptrend after sideways consolidation which signals upside movement. Also, among the oscillators, stochastic is in rising direction and in the overbought zone with a reading of around 94.

Thus, we recommend buying this stock at current levels for a target of Rs 319 over the next one month. The stop loss should be fixed at Rs 266.

Dabur Ltd: Buy| LTP: Rs 386.75| Target: Rs 427| Stop loss: Rs 364| Return 10.4%

The stock seems to be enjoying its multi-year bull run and price-wise, the stock price is trading well above 10-DEMA indicating bullishness in the counter. The stock is trading near all-time high which shows its outperformance in the recent market turbulence.

Further, if we try to analyze 'Bollinger Bands', it clearly goes with our bullish stance on the counter. Considering all above scenarios, a strong upside from current levels cannot be ruled out.

Thus, we recommend buying this stock at current levels for a target of Rs 427 over the next one month, and the stop loss should be fixed below Rs 364.

Torrent Pharma Ltd: CMP: Rs 1,438| Buying Range: Rs 1,430-1,400| Target: Rs 1540| Stop loss Rs 1375| Return 7%

On the weekly chart, the stock has observed a ‘Down Sloping Trendline’ breakout at Rs 1,420 on closing basis which signals a change of trend towards the upside.

This breakout is accompanied with high volumes indicating increased participation. The stock is currently trading above all its crucial SMA i.e. 20, 50, 100. The RSI and Stochastic are also in the positive terrain.

BPCL: CMP: Rs 408.55| Buying Range: Rs 408-400| Target: Rs 430-437| Stop loss: Rs 391| Return 7%

BPCL has given a downward sloping trendline breakout at Rs 400 which was also the immediate acting resistance in the stock and went on to make a high of Rs 411.50 on a closing basis.

The stock is witnessing high volume along with the support placed at 20 and 50-days SMA. The momentum indicators are also signaling a positive probability towards the bullish momentum in the stock.

Godrej Consumer Products: CMP: Rs 1,163.90| Buying Range: Rs 1,163-1,145| Target: Rs 1,230| Stop loss: Rs 1,115| Return 5.6%

Godrej CP has given the breakout from its last five weeks consolidation range of Rs 1,150-1,070 on the weekly closing basis. This breakout is accompanied with high volumes indicating increased participation.

The stock is forming higher top higher bottom formation on daily/weekly charts indicates sustained uptrend. The strength indicators are in positive territory which indicates positive momentum to continue further.

Hero MotoCorp: Buy| Target: Rs 3,749| Stop loss: Rs 3,500| LTP: Rs 3,623.75| Return 3%

After retracing 50 percent of its rally from the recent lows of Rs 3,445 this counter appears to have resumed its up move after hitting a low of Rs 3,528.

The momentum in this counter shall pick up once it manages a close above Rs 3,624 paving way for a swift up move towards Rs 3,700 levels.

Hence, positional traders are advised to buy into this counter for a target of Rs 3,749. A stop-loss suggested for the trade is below Rs 3,500.

Reliance Industries: Buy| Target: Rs 970| Stop loss: Rs 900| LTP: Rs 929.20| Return 5%

Albeit this counter has underperformed in the recent past, it appears to have formed a decent base around Rs 900 levels from the cushion of which it is bounced back.

On resumption of the up move, it can make an attempt to test the gap down area of Rs 974 – 976 registered on 16th of May. Hence, positional traders are advised to buy into this counter for a target of Rs 970 and a stop loss below Rs 900.

HCL Technologies: Buy| Target: Rs 997| Stop loss: Rs 885| LTP: 906.40| Return 10%

This counter appears to be in a consolidation mode, around Rs 900 levels after the recent correction from the highs of Rs 1,108 registered in April.

As bottom appears to be in place around Rs 887 sooner than later it should resume its up move as the entire sector is looking positive. A minimum target of Rs 997 is possible because it is 50 percent retracement of the entire fall from the top of Rs 1,108 to Rs 887.

As risk-reward ratios are favorable, positional traders should make use of this opportunity to go long on the stock with a stop below Rs 885 for an initial target of Rs 997.

MORE WILL UPDATE SOON!!

Nifty upside capped at 10,790;Ideas that could return up to 12%

We expect the Nifty to remain range bound on a weekly basis, with the upside and downside capped at 10,790 and 10,570 levels, respectively.

 

The Indian equity market continued to trade sideways during the week gone by in the backdrop of May series expiry and several other domestic and global developments.

The Nifty marginally gained momentum after it breached the crucial level of 10,600 on the downside last week, but managed to touch a high of 10,764 on the weekly chart. Despite a positive momentum, it has failed to hold this level on Friday as it closed at 10,696, a gain of about 0.86 percent on a weekly basis.

After forming a bullish candlestick pattern on the Thursday’s price chart, the Nifty formed a bearish pattern on Friday, although no major formation was seen on a weekly basis. Its weekly relative strength index (RSI) stood at 58, indicating no price divergence, while moving average convergence divergence (MACD) indicated bullishness as it continued to trade above the ‘Signal Line’.

The market is likely to trade sideways ahead of the Monetary Policy Committee’s meet this week and take direction from the outcome. Any weak global sentiment is also likely to weigh on the market as witnessed in the past few sessions last week.

Hence, we advise investors to be stock-specific, applying a strict stop-loss on a trailing basis. We expect the Nifty to remain rangebound on a weekly basis, with the upside and downside capped at 10,790 and 10,570 levels, respectively.

Here is a list of top stocks that could deliver 4-12 percent returns in the short-term:

Bodal Chemical Ltd: Buy | Target: Rs 161 | Stop-loss: Rs 132 | Return 12%

Bodal Chemical witnessed a sharp correction in the last six-month from Rs 172 levels towards Rs 114-111 zone where it formed two consecutive bottom trend-channel which indicated a strong support.

Recently, it witnessed a strong upward momentum where it made two higher peaks after breaching its 20-days EMA level placed at Rs 135 levels.

Substantially, the scrip also witnessed a strong volume growth on the weekly basis and formed a bullish candlestick pattern on the weekly price chart with about 13 percent gain in same period despite closing lower on Friday.

The weekly RSI level up at 55 coupled with positive divergence on MACD which indicates a buying regime at the current level.

The scrip has a support placed at Rs 114 levels and resistance level at Rs 172. We have a buy recommendation for Bodal Chemicals which is currently trading at Rs. 143.60

KPIT Technologies Ltd: Buy | Target: Rs 303 | Stop-loss: Rs 273 | Return 6%

KPIT Technologies continued to trade on positive trajectory throughout the week despite a weak market breath and managed to breakout from crucial moving average level placed at 267.

Although the stock witnessed a minor correction to trade below Rs 247 levels but made a strong rebound to make the fresh higher peak. The scrip also witnessed a sharp volume buildup indicating a sustained trend.

The scrip formed a solid bullish candlestick pattern on its weekly price chart indicating upward momentum. Further, a secondary momentum indicator witnessed a revival with weekly RSI level continuing in buying zone coupled with a positive cue on MACD.

The support level for scrip is currently placed at 262 and resistance level at Rs 315. We have a Buy recommendation for KPIT Technologies which is currently trading at Rs 285.75

 3-5 positional calls that could offer handsome returns to investors in the next 1 month?

A) Here is a list of top three stocks that could offer 6-7% returns in the next one month:

Torrent Pharma Ltd: CMP: Rs 1,438| Buying Range: Rs 1,430-1,400| Target: Rs 1540| Stop loss Rs 1375| Return 7%

On the weekly chart, the stock has observed a ‘Down Sloping Trendline’ breakout at Rs 1,420 on closing basis which signals a change of trend towards the upside.

This breakout is accompanied with high volumes indicating increased participation. The stock is currently trading above all its crucial SMA i.e. 20, 50, 100. The RSI and Stochastic are also in the positive terrain.

BPCL: CMP: Rs 408.55| Buying Range: Rs 408-400| Target: Rs 430-437| Stop loss: Rs 391| Return 7%

BPCL has given a downward sloping trendline breakout at Rs 400 which was also the immediate acting resistance in the stock and went on to make a high of Rs 411.50 on a closing basis.

The stock is witnessing high volume along with the support placed at 20 and 50-days SMA. The momentum indicators are also signaling a positive probability towards the bullish momentum in the stock.

Godrej Consumer Products: CMP: Rs 1,163.90| Buying Range: Rs 1,163-1,145| Target: Rs 1,230| Stop loss: Rs 1,115| Return 5.6%

Godrej CP has given the breakout from its last five weeks consolidation range of Rs 1,150-1,070 on the weekly closing basis. This breakout is accompanied with high volumes indicating increased participation.

The stock is forming higher top higher bottom formation on daily/weekly charts indicates sustained uptrend. The strength indicators are in positive territory which indicates positive momentum to continue further.

MORE WILL UPDATE SOON!!

Sell in May go away' came true; 376 stocks in BSE 500 index fell up to 67%

Foreign institutional investors pulled out more than Rs 8,000 crore from equity markets, and over Rs 17,000 crore from the India debt market which kept the pressure on the rupee.

  

The age-old saying ‘sell in May and go away’, which in fact was more relevant for US markets came true for Indian markets in 2018. The Nifty50 closed flat for the month of May but with a negative bias while three out of four stocks gave negative returns.

The Nifty50 slipped marginally to 10,736.15 on May 31 from 10,739.35 registered on April 30, although, the index managed to recover over 300 points from intraday low of 10,417.80 recorded on May 23.

As many as 376 stocks from the S&P BSE 500 index gave negative returns in the month of May which fell up to as much as 67 percent. Stocks which witnessed selling pressure include names like Vakrangee (down 67 percent), Manpasand Beverages (down 44 percent), HCC (down 36 percent), Jet Airways (down 35 percent), Avanti Feeds (down 34 percent) etc. among others.

Shareholders of Vakrangee and Manpasand might have more than just a price fall to worry about. Stocks of both companies witnessed tremendous selling pressure after auditors of both the companies resigned ahead of quarterly results.

On April 27, Price Waterhouse & Co resigned as auditor of Vakrangee Ltd, and on May 26, Deloitte Haskins & Sells resigned as auditor of Manpasand Beverages Ltd.

HCC came under pressure after auditor of the company’s unit Lavasa Corp had said on Wednesday it has “significant doubts about the company’s ability to continue as a going concern”. The news came out in the first week of May.

What led to the fall, and way ahead?

Trade war concerns between US and China, political uncertainty in Karnataka, rising crude oil prices, falling rupee against the dollar, disappointing results especially from public sector banks as well as relentless selling by foreign institutional investors (FIIs).

Foreign institutional investors pulled out more than Rs 8,000 crore from equity markets, and over Rs 17,000 crore from the India debt market which kept the pressure on the rupee.

Well, as we enter June, there are plenty of headwinds for Indian markets. For starters, we have Reserve Bank of India (RBI) policy meet in this week, followed by US Fed meeting on June 12-13 will keep investors across the globe on the edge. A rate hike by the central bank seems to be factored in by the markets, suggest experts.

Markets were fairly volatile during last week on renewed trade war worries and continued FII selling despite Q4FY18 GDP growth coming in at 7.7 percent. Going ahead the focus of the market globally will be on Fed rate hikes, bond yields, oil prices, and trade war tensions.

June US Fed rate hike is already factored in by markets but it is important to watch out as to how many rate hikes are expected for CY18. Domestically, RBI policy and its outcome on rates is eyed closely due to the impact of higher fuel prices, expected an increase in MSP on inflation and improved growth prospects for the economy.

Technically:

On the weekly and monthly charts, Nifty made an indecisive pattern ‘Spinning Top’ was witnessed on the weekly charts whereas on the monthly charts it registered a Doji kind of formation. April was a strong month whereas in May we haven’t made any progress.

For the month of June, most experts feel that the index is likely to consolidate in a range rather than seeing any big moves on either side. On the upside 10,777, 10,929 remains a crucial resistance to watch out for and on the downside, support is placed at 10,417.

Going forward, our best case scenario for June still remains sideways to negative based on our long-term trend projections. As we have been pointing out that we are in a multi-month corrective phase from the highs of 11,171, it seems that the pullback rally from the lows of 9,951 culminated at recent highs of 10,929.

According to the Elliot wave parlance, the triangular structure will unfold in 5 legs and it seems that second leg culminated at the recent high of 10,929. If our reading is right then going forward we should breach recent lows of 10,417 and may extend the correction up to 10,320 to culminate the third leg.

MORE WILL UPDATE SOON!!

Big brokerages bet on these 10 wealth creating ideas for 20-50% return in a year

One does not need 100 stocks to generate wealth but can achieve the same with a handful of stocks. Legendary investor Warren Buffett once said, “Wide diversification is only required when investors do not understand what they are doing." Hence, investor focus should be on a handful of stocks rather than creating a portfolio which consist of over 50 stocks.

Wealth creation requires patience and research. Returns from the markets are never linear. Hence, portfolio diversification is a must to ensure profitability. Not every stock will emerge a multi-bagger, but chances are that if you placed your bets on the right stocks you will be a happy investor at the end of the year.

With India’s macroeconomic cues slipping, earnings nowhere near the double-digit mark and looming uncertainty around the 2019 general elections, it will not be easy for investors to make money. The best strategy would be to bet on stocks that have declared strong January-March earnings and growth momentum.

Bulk of the market returns in 2017 was largely led by expansion in the price-to-earnings ratio. However, experts said they are seeing signs of a revival in earnings growth, with growth expected to pick up meaningfully in FY19.

The long-term story for equities still remains intact, especially for those investing in a systematic manner. Going forward, market returns will be led by earnings growth rather than P/E expansion,” Sampath Reddy, Chief Investment Officer at Bajaj Allianz Life Insurance, said.

He is positive on consumption, private financials, IT and metals sectors. “We prefer largecap equities to small/midcap ones, with current valuations at a significant premium in the latter segment.”

Here is a list of 10 buy ideas from different brokerages that can deliver 20-50 percent returns in the next one year:

Mahindra & Mahindra: Buy | Target raised to Rs 1,075 from Rs 960 earlier | LTP: Rs 895.60 | Return: 20%

CLSA maintains a buy rating on M&M post Q4 results but raised its 12-month target price to Rs 1,075 from Rs 960 earlier.

Domestic vehicle manufacturer Mahindra and Mahindra reported a 50 percent year-on-year rise in its net profit for the March quarter to Rs 1,155 crore on Tuesday.

M&M delivered a strong Q4 led by better-than-expected margins. The rural outlook improved on expectations of a normal monsoon and expectations of a big MSP hike.

New MPV launch in FY19 is likely to boost SUV segment volume. CLSA expects strong 18 percent EPS CAGR over next two years, and valuations still remain attractive.

Dish TV: Buy | Target: Rs 100 | LTP: Rs 74.45 | Return: 34%

CLSA maintains a buy rating on Dish TV with a target price of Rs 100. The direct-to-home operator reported a consolidated net profit at Rs 118.21 crore for the fourth quarter ended March 2018.

The company had posted a net loss of Rs 29.49 crore during the January-March quarter a year ago, Dish TV said in a BSE filing.

The management reiterated merger synergy of Rs 500 crore in FY19. CLSA sees 10 percent EBITDA CAGR over FY19-21. The ongoing open offer caps downside risk for the stocks, said the note.

Commenting on the outlook, Dish TV said that it expects the year to be positive as the company expects to outgrow the industry growth rate backed by the launch of new set-top-boxes that would be full HD compliant.

Prestige Estates: Outperform | Target: Rs 396 | LTP: Rs 260.95 | Return: 51%

Macquarie maintains an outperform rating on Prestige Estates with a 12-month target price of Rs 396. The realty firm reported 21 percent increase in its consolidated net profit at Rs 107.1 crore for the fourth quarter of last fiscal on higher sales. Its net profit stood at Rs 88.1 crore in the year-ago period.

The Q4 net profit was in-line with estimates. The pre-sales pick-up aided by new launches said the Macquarie note. The real estate major targets to launch at least one project in affordable housing.

Prestige Estates remains one of the preferred picks in real estate space, said the note.

Escorts: Buy | Target: Rs 1,150 | LTP: Rs 933.80 | Return: 23%

HSBC maintains a buy rating on Escorts post Q4 results with a 12-month target price of Rs 1,150. The growth momentum remains intact. Going forward, the margins are likely to improve across all businesses. Increasing captive financing is a key positive for future performance, said the note.

Bharat Petroleum Corporation: Buy | Target: Rs 568 | LTP: Rs 400.30 | Return: 42%

Motilal Oswal maintains a buy rating on BPCL post Q4 results with a 12-month target price of Rs 568. The EBITDA was above estimates led by core operating performance. The net profit benefitted by higher other income and lower tax rate.

Stabilisation of Kochi expansion is likely to expand Kochi refinery GRMs. Sharp correction seen in the oil & gas space due to rise in crude oil prices offers an attractive opportunity to add.

Larsen & Toubro: Buy | Target: Rs 1,730 | LTP: Rs 1365.20 | Return: 27%

CLSA maintains a buy rating on L&T post Q4 results with a target price of Rs 1,730. The Q4 results were a beat on guidance as well as on inflow and margins. The Hydrocarbon business is going to be the emerging star and fast-growing business going forward.

L&T has a credible strategy to improve both growth and its return on equity. The stock is a good proxy for domestic capex.

NTPC: Buy | Target: Rs 200 | LTP: Rs 165.30 | Return: 21%

CLSA maintains a buy rating on NTPC post Q4 results with a target price of Rs 200. The March quarter results were in line with estimates, but profit figure remains muted by higher cost.

Capacity additions are clearly on track. CLSA expects a marked pick-up in profit growth due to focused efforts to secure coal.

Capacite Infraprojects: Buy | Target: Rs 340 | LTP: Rs 282.80 | Return: 20%

Angel Broking initiates a buy call on Capacite Infraprojects with a target price of Rs 340. The company has a large order book with marquee client base which provides revenue visibility.

The company has a focused approach which leads to a strengthening of its position. Increased floor space ratio (FSI) to trigger construction work in Mumbai region. Expanding presence in cities with a high growth potential given revenue visibility.

Tech Mahindra: Buy | Target: Rs 880 | LTP: Rs 686.40 | Return: 28%

Goldman Sachs maintains a buy rating on Tech Mahindra post Q4 results but raised its 12-month target price to Rs 880 from Rs 824 earlier.

The Q4 results were above expectations on continued margin beat. The entire topline growth was led by enterprise business in Q4. Going forward, 5G remains a key structural growth opportunity for Tech Mahindra, said the report.

Bank of Baroda: Buy | Target: Rs 180 | LTP: Rs 138.70 | Return: 30%

Edelweiss maintains a buy rating of Bank of Baroda post Q4 results with a target price of Rs 180. The public sector lender posted a net loss of Rs 3,102.34 crore in the March quarter, missing estimates due to a jump in provisions for bad loans.

Provisions for non-performing assets for the quarter rose by 190 percent YoY to Rs 7,052.53 crore in Q4. The March quarter was marred by higher slippages, said the Edelweiss note.

However, the loan growth remains strong with better rated corporate and retail segments. The brokerage firm expects quality growth to gain traction in near future.

MORE WILL UPDATE SOON!!