Buy Indian Oil Corporation, target Rs 170

Indian Oil Corporation appears to have formed a strong base around Rs 150 where it is attracting huge buying interest as pointed out by long lower shadows on weekly charts.

        

After the recent correction from the highs of Rs 177, Indian Oil Corporation appears to have formed a strong base around Rs 150 where it is attracting huge buying interest as pointed out by long lower shadows on weekly charts.

Hence, sustaining above this level it can initially target Rs 170. A stop loss suggested for the trade is a close below Rs 154.

MORE WILL UPDATE SOON!!

Accumulate Havells India, target Rs 590

We feel traders shouldn’t miss this chance and accumulate fresh long in the range of Rs 555-560 for target of Rs 590.

 

After a strong up move from Rs 520 to Rs 580 levels, Havells India has retraced marginally. It has reached close to its price support zone placed around Rs 555, offering a fresh buying opportunity.

We feel traders shouldn’t miss this chance and accumulate fresh long in the range of Rs 555-560 for target of Rs 590. It closed at Rs 560.05 on July 16, 2018.

MORE WILL UPDATE SOON!!

Technical View: Nifty forms strong bullish candle; 11,080 next key level to watch

Option band signifies an immediate trading range in between 10,929 to 11,080 zones, experts said.

  

The Nifty50 recouped some of its previous day's losses to close the session above psychological 11,000-mark on Tuesday, forming strong bullish candle on the daily charts.

The rally was backed by oil & gas, banking & financials, metals and pharma stocks. All sectoral indices closed in the green except IT index which fell a percent.

The broader markets, which were badly hit in the previous session, also participated in the rally with Nifty Midcap index rising more than 2 percent.

The Nifty50 after opening higher at 10,939.65 wiped out early gains to hit an intraday low of 10,925.60, but managed to recoup those losses in morning trade itself and reclaimed psychological 11,000-mark in later part of the session. The index hit an intraday high of 11,018.50, before closing 71.10 points higher at 11,008.

The closing above 11,000-mark is a good thing but to maintain that momentum, the index has to close above 11,080 levels and then only it can be able to march towards its earlier life time high of 11,171 seen in January, experts said.

"It was heartening to see Nifty50 strongly recoiling after testing erstwhile breakout point present around 10,930 levels before bulls signed off the session in style with a strong bullish candle.

He said on the back drop of today’s move it appears that the last three sessions of corrective consolidation phase is a mere pause in the ongoing strong uptrend as advance decline ratio also tilted in favour of bulls during the course of the day.

Momentum in the indices shall pick up further on a close above 11,080 which shall also confirm the end of recent corrective swing there by paving the way for new life time highs which may not be difficult as Bank Nifty which was looking relatively stronger registered a bullish engulfing formation thereby erasing Monday's losses.

Hence, traders are advised to create fresh long positions with a stop below 10,925 on closing basis and look for bigger targets around 11,171.

Nifty is forming wave extension on the upside on the daily chart. "This means that the bulls are likely to push the index towards north.

India VIX fell by 0.52 percent to 12.88 levels.

On the option front, maximum Put open interest (OI) was seen at 10,600 followed by 10,800 strike while maximum Call OI was at 11,000 followed by 11,200 and 11,100 strikes. Significant Put writing was seen at all the strikes from 10,800 to 11,000 while Call unwinding was seen at 11,000 strike.

Option band signifies an immediate trading range in between 10,929 to 11,080 zones, experts suggest.

Nifty index managed to hold immediate support of 10,925-10,929 zones and recovered towards previous day’s high of 11,020 zones.

It retested previous breakout zones and a hold above 11,000 could extend its move towards 11,080 then 11,171 levels while on the downside supports are seen at 10,929 zones.

Bank Nifty formed a Bullish Belt Hold candle on daily scale and managed to reclaim above 27,000 zones.

Now it has to continue to hold above 26,750 zones to extend its move towards 27,165 then 27,400 levels.

MORE WILL UPDATE SOON!!

Nifty could rally towards 11,000 after some consolidation in July series

With the start of the results season in the upcoming week, the market will become more stock-specific.

 

During the week, Nifty found support near highest Put base of 10,600 and staged a recovery as well. In fact, it has ended above 10,700 for the sixth consecutive week. The index has shown tremendous resilience, given the rupee depreciation from 67 to 69/USD during this period.

A weaker rupee has pushed up stocks in technology and pharmaceuticals space. Also, the buyback offer by Tata Consultancy Services (TCS) also kept the stock at a higher band.

As such, volatility has been lower, thus supporting the positive bias for Nifty. With the start of the results season in the upcoming week, the market will become more stock-specific.

The highest Call base for July series is placed at 11,000 strike, which means after some consolidation the Nifty can recover towards 11,000.

 

Bank Nifty: 26,200 remains a crucial support for upside to continue

The index has continued to hold 26,200 since June. Market participants respected the same levels in July as well from where the index rallied above 26,500.

Private sector banks continued to outshine, while midcap stocks such as Yes Bank and IndusInd Bank also saw a fresh upmove.

As US imposed sanctions of USD 34 billion on Chinese imports, trade war fears further intensified.

However, most of these cues are factored in and there is no panic which was seen last week. The 26,200 Put continued to see an addition in the past few weekly expiry.

Positions have also been formed in 26,400 Put which can be seen as an intermediate support for the index. On the Call front, OI is well distributed in 26,700 to 27,000 strikes that can be a potential target on the upside.

Looking at the increasing discount on the index, we feel a close above 26,700 is likely to trigger short covering. The price ratio of Bank Nifty/Nifty remained near 2.46 levels.

We feel the ratio is likely to improve and the outperformance in the banking stocks can be seen once the index manages to end above 26,700

Emerging markets cautious amid higher crude oil prices:

Emerging markets (EM) continued to remain under pressure as trade war concerns continue to remain an overhang. MSCI EM index tested almost one-year lows weighed down by weakness in EM currencies triggered by outflows.

Although US FOMC minutes were cautious about recent global trade friction, they continued to envisage strength in the US economy.

The Fed is expected to increase interest rates in September while probability is building up for a fourth rate hike in December 2018.

Emerging markets saw mixed flows in equities during the week. Indonesia (USD 65 million), Malaysia (USD 77 million), Taiwan (USD 705 million) and Thailand (USD 266 million) witnessed outflows.

In the upcoming week, market participants would brace themselves for a bout of volatility if the US moves further to impose tariffs on USD 200 billion of Chinese imports as announced earlier by US President.

We could see further pressure on emerging markets as well as currencies if the trade friction escalates to the next level of additional tariffs impositions.

 

MORE WILL UPDATE SOON!!

Rs 1.2 lakh crore boost for rural income! These 11 stocks are likely to benefit the most from MSP hike

The MSP hikes should impact 310-330 mn tonnes of agri production, 25 percent of agriculture’s GDP contribution and 4.5 percent of GDP.

 

The much-awaited decision on minimum support price (MSP) was finally made by the government this week. Rural income is likely to get a boost but at a cost of up to 20 bps impact on the fiscal deficit, according to analysts from top brokerages.

The government announced hikes of 4-53 percent in the minimum support prices (MSP) for summer crops. While details on the implementation of the MSP hike are awaited, government intentions are clearly supportive of rural incomes, CLSA said in a note.

The MSP hikes should impact 310-330 mn tonnes of agri production, 25 percent of agriculture’s GDP contribution and 4.5 percent of GDP. In nominal terms, as the MSP gets implemented, the positive impact on the rural income should be Rs 1.2 lakh crore.

The government, as of now, estimates the cost of these hikes at Rs150 bn-300 bn (10-20bp of GDP) but the final number depends on how the MSPs are implemented, highlighted the CLSA note.

The government approved the hike in MSP of all Kharif crops to 1.5x of the cost of production. Consequently, MSP growth ranged from 3.7 percent (for Urad) to 52.5 percent (for Ragi), implying production-weighted average growth of 15.8 percent in FY19 compared to 7.1 percent in FY18.

This is the fourth highest growth in MSP during the past two decades, with higher growth in FY08, FY09 and FY13, interestingly, all were closer to general elections.

Whether or not higher MSPs boost farmers’ income depends entirely on better reach and higher procurement of various procurement agencies of the center and states. However, it is sentiment-positive for the rural consumption.

Who would be the key beneficiaries?

Stocks in sectors related to consumption, autos, banks, NBFCs, are likely to benefit the most from the hike in MSP, suggest experts.

CLSA’s favourite rural plays are M&M, ITC, Dabur, Emami and Crompton Consumer. The rural largesse will, however, adversely impact the fiscal deficit (10-20bp) and inflation (30-50bp), raising macro concerns.

 

Rural consumption is picking up and urban consumption has been doing well too. Sectors like QSR and processed foods and discretionary segments like retail, jewellery, and apparel have shown a good pick-up in consumption already.

Autos, FMCG, NBFC and select Mid-caps are the natural beneficiaries of rural consumption pick-up, in our view. After the rally in last one year, valuations in the consumption pack are rich,” added the Motilal Oswal note. Key rural beneficiaries from the brokerage firm include names like Maruti, Mahindra & Mahindra, Hindustan Unilever, Britannia, Emami, MMFS, Coromandel.

However, given the strong earnings visibility, underlying macro triggers and quality management pedigree, we expect them to remain in focus in a volatile broader market environment.

MORE WILL UPDATE SOON!!

Good quality small & mid-cap stocks can be bought for higher returns

The Nifty made a V-shaped recovery in the past month after a panic-led fall, indicating that the market has stabilized in the immediate term.

 

Small and midcap indices have corrected by around 25-30 percent, while some stocks have plunged over 50 percent this year. But they seem to be nearing their bottom as negative sentiment has caused a deep correction in these stocks.

The Nifty on a weekly basis closed with gains of 0.54 percent. 

The Nifty made a V-shaped recovery in the past month after a panic-led fall, indicating that the market has stabilised and bottomed out in the immediate term.

On the weekly chart, correction phase seems to be tighter and a sideways movement is expected. The market is expected to be trading in a range-bound manner unless trade war fears and macro (issues) escalate further.

Bank Nifty seems to be trading in choppy waters, but has maintained a strong support at 26,000 levels. Since June, Bank Nifty has been trading in a tight range and we expect a sideways movement in the short term.

As far as other indices are concerned, small and midcap indices have corrected by around 25-30 percent and some stocks by over 50 percent. They seem to be nearing their bottom as negative sentiment has caused a deep correction in these stocks.

Good quality small and mid-cap stocks can be bought for higher returns in the portfolio.

Plenty of stocks hit fresh 52-week lows in July compared the ones which hit 52-week highs. The absence of buying in broader markets is likely to cap upside for markets.

Markets have shown high volatility in the past few months due to weakening rupee, high crude oil prices, trade war woes, and political ambiguity.

When markets are facing this kind of volatility, it is best to be patient and hold the stock instead of following the herd and selling them when the prices have fallen.

The stocks hitting lows need not necessarily be bad, but an unemotional assessment of quality check has to be done before taking any decision. If nothing has changed fundamentally, then they should be held on and added more in the portfolio.

Top 3-5 positional calls which could give handsome returns to investors in next 1 month?

Yes Bank seems to be a good positional call as it has had the longest consolidation and has taken support at 200-DMA.  ACC has decisively reversed the corrective fall and is likely to move higher.

Buy on dips should be a strategy for this stock. Endurance Technologies, which has made a crossover with its 20- and 50-DMA, is indicating a good positional buy. It has consolidated and stayed above 200-DMA in this corrective phase.​

MORE WILL UPDATE SOON!!

Portfolio check: These top stocks could return 21-115% in 1 year

After hitting record highs in late January, followed by sharp sell-off, the market has been consolidating and trying very hard to move towards that all-time high.

 

The Sensex rallied 4 percent in the first half of 2018, but the broader market corrected sharply with the Nifty Midcap index falling 14 percent, especially after the strong 48 percent outperformance in 2017.

Experts said some mid, small and largecaps are trading at attractive valuations. We expect stock-specific movement in largecaps to continue to support the market. But mid and smallcaps are likely to take more time to settle.

Considering the current rangebound trade, they feel the market may be waiting for earnings to pick up from the second half of FY19.

Big reform decisions taken by the government, normal monsoon resulting in a likely increase in consumption and an earnings recovery continue to support the market, but global trade concerns, volatility in crude oil prices, weakening rupee versus the dollar and an increase in the cost of capital are headwinds to the rally.

In the backdrop of higher fuel prices, increase in interest rates and a weakening rupee-dollar scenario, we are of the view that market may trade in a range and is unlikely to witness any strong appreciation in the next 6-8 months.

Invest in quality stocks, which are less vulnerable to macro concerns and have healthy cash flow visibility. Considering the likely pick-up in rural consumption, higher utilisation and recent reforms, he is hopeful that corporate earnings will witness double-digit growth in coming quarters.

Here is the list of top stocks that could return 21-115 percent in a one-year period:

Larsen & Toubro: Buy | Target - Rs 1,540 | Return - 23%

L&T enjoys several levers across its business/geographical segments. It has emerged as the E&C partner of choice in India, which provides a robust foundation to capitalise on the next leg of investment cycle.

Under its new five-year strategic plan to FY21, L&T aims to: (a) grow sales at 12-15 percent CAGR to reach Rs 2 lakh crore by 2021, (b) expand margins to 11.2 percent, up 120bp over FY16, driven by higher profitability in key manufacturing verticals (power, process, forgings and Katupalli yard) and hydrocarbons, (c) unlock value via asset sales to drive RoE to 18 percent from 12 percent in FY16 and (d) reduce working capital to 18 percent of sales from 20 percent currently.

Manufacturing businesses (like Shipyard, Power BTG, and Forgings) also offer interesting possibilities over the longer term. Many of these businesses are difficult to replicate, and L&T is strongly positioned as a dominant player.

We maintain Buy with an SOTP-based target price of Rs 1,540 (E&C business at 22x FY20E EPS, to which we add Rs 520 for subsidiaries). The stock trades at 19x/15x its standalone business (ex. subsidiaries) on FY19/FY20 EPS versus its historical average of 22x. Key risks to the rating include (a) a sharp slowdown in government spending and (b) a sharp fall in oil prices in the Middle East.

Tata Steel: Buy | Target - Rs 700 | Return - 25%

Tata Steel and ThyssenKrupp AG have signed a definitive agreement to combine their European steel businesses in a 50:50 joint venture to be named ThyssenKrupp Tata Steel BV headquartered at Amsterdam, Netherlands.

The formation of the joint venture paves the way to offload significant debt from Tata Steel's consolidated balance sheet to the new joint venture. The deleveraging of balance sheet would aid the management to focus more on the profitable domestic business and pursue organic and inorganic growth prospects.

We continue to remain positive on the domestic steel consumption story driven by increased government expenditure/policies and supportive macros. We like Tata Steel given the integrated nature of domestic operations, which enables it to report higher EBITDA/tonne vis-à-vis its domestic peers.

Going forward, for Indian operations, we maintain our sales volume estimate of 12.5 MT for FY19E and 12.8 MT for FY20E with EBITDA/tonne estimate of Rs 13,250 per tonne for FY19E and Rs 14,000/tonne for FY20E.

For European operations, we model sales volume estimate of 10 MT and EBITDA/tonne estimate of $75/tonne for both FY19E and FY20E, respectively. We value the stock on an SOTP basis and maintain target price of Rs 700. We maintain Buy recommendation on the stock.

Tata Chemicals: Buy | Target - Rs 876 | Return - 27%

Tata Chemicals' specialty chemical (S&C) businesses includes salt, agri inputs, pulses, spices and nutritional solutions. Tata Chemicals has adopted a strategy for the next 3-5 years to focus on its S&C business and consumer business. Post exiting from fertilizer business, Tata Chemicals is planning to increase the contribution from S&C business to around 35 percent by FY20E, considering the current product portfolio.

It is exploring new avenue in FMCG sector, which is a high margin business with low working capital.

Tata Chemicals has reduced its debt through sale of investment in Tata Global Beverage, divestment of the fertilizer business and also through cash generated from its operations. Currently, it has a net cash position of Rs 1,02 crore while net consolidated debt is around around Rs 4,130 crore.

With global leader in soda ash and sodium bicarbonate, exiting from low margin fertiliser business, focus on specialty chemical and consumer business, exploring new avenue in FMCG sector with Tata Sampann and reduction of debt through sale of investment, we value Tata Chemicals at 7.00x FY20E EPS of Rs 125.20 to arrive at target price of Rs 876.

Exide Industries: Buy | Target - Rs 320 | Return - 25%

As the company is one of the largest leaders in the battery space, it is likely to get benefit, if the demand scenario improves. Moreover, it is also expected that cost reduction initiative and focus on profitable segment would drive the margins going forward.

Thus it is expected that the stock will see a price target of Rs 320 in 8 to 10 months time frame on a current P/E of 31.56x and FY19 (E) earnings of Rs 10.14.

Persistent Systems: Buy | Target - Rs 971 | Return - 21%

According to the management, the company expects an accelerated demand from enterprises to leverage digital ecosystems for innovation and growth. Its emerging technologies, transformational experience and continued progress with collaborations and acquisitions would give optimism for its growth going forward.

Moreover, a gradual improvement in utilization rate and better revenue growth in the non-linear business would support EBITDA margin. Thus, it is expected that the stock will see a price target of Rs 971 in 8 to 10 months time frame on an expected P/E of 21x and FY19 (E) earnings of Rs 46.23.

Mahindra & Mahindra Financial Services: Buy | Target - Rs 609 | Return - 34%

Mahindra & Mahindra Financial Services (MMFS) is one of India’s non-banking finance companies focused in the rural and semi-urban sector and is one of the largest Indian tractor financier.

The company is primarily in the business of financing purchase of new and pre-owned auto and utility vehicles, tractors, cars, commercial vehicles, construction equipment and SME Financing.

The company’s strength in vehicle financing which is showing good traction across products & geography. Its housing-finance loan growth is expected to expand 18-20 percent CAGR.

The main driver for improvement in RoA would be gradual increased share of SME business going ahead. Normal Monsoon, Higher farm income and Govt. spending will give boost to company’s business.

The company has a strong Rural & Semi-Urban area presence – with 1284 offices covering 27 States & 4 Union Territories. The company has a healthy mix of Both - ( A) Vertical lending across products & (B) Geographic mix which reduces volatility & risk. We have a Buy coverage on M&M Financial with a target price of Rs 609 per share.

Indostar Capital Finance: Buy | Target - Rs 650 | Return - 29%

Indostar Capital Finance (Indostar) is an NBFC promoted by Mauritius-based Indostar Capital (a holding company with a 57.7 percent stake in Indostar and owned by various institutions, including the Everstone Group, which has a 51.2 percent stake in Indostar Capital).

It commenced operations in 2011. In Apr’17, Sridhar (ex-CEO of Shriram Transport) was appointed Indostar's CEO to lead its foray into vehicle and housing finance. The company has demonstrated strong execution capabilities (loan book posted a 25 percent CAGR over FY14-18) by initially building the corporate book (74 percent of loans as of FY18) and subsequently entering SME financing and effectively executing its strategy in the segment (23 percent of loans as of FY18).

Over the past year, the company has tried to balance its loan book by diversifying its exposure into retail segments such as vehicle and housing finance.We forecast a net profit CAGR of 25 percent over FY18-20E, led by strong loan growth (50 percent CAGR over FY18-20E) and steady asset quality.

We forecasts RoA/RoE of 3.1/11.2 percent by FY20E (versus 3.7/11.7 percent in FY17). Indostar trades at 1.3x BV FY20E, which is the cheapest among NBFCs in coverage. We initiate coverage with a Buy rating and a Mar'19 target price of Rs 650, valuing the stock at 1.7x Mar’20 PB (implied FY20 P/E of 16x).

J Kumar Infraprojects: Buy | Target - Rs 321 | Return - 42%

Buttressed by stable order inflows so far this fiscal, JKIL is eying projects over Rs 4,500 crore for the next couple of years, including metro rail orders of Pune, Mumbai Delhi and Bangalore. It recently bagged order for construction of underground shafts and R&R facilities for Pune Metro Rail worth some Rs 222 crore.

Yet large orders of the size of Mumbai Metro Line 3 have not been assayed last fiscal. It missed out on not so thinly discussed projects like Mumbai Trans Harbor Link (MTHL) and Mumbai Nagpur Expressway (where it failed to emerge among 18 successful bidders). It also lost out on Mumbai Metro Line 4 corridor order where consortiums of Reliance Infrastructure and Tata Project emerged as successful bidders.

Earnings fortification over the next few years rest on timely execution of sizeable projects - Mumbai metro line2, line 3, and JNPT road projects.

Execution of newly bagged projects like Pune Metro Rail, improvement of Chheda Nagar Junction, Ghatkopar and construction of South Delhi Municipal Corporation Head Quarter would not gather pace before the start of next fiscal.

On balance, we advise buying the stock with revised target of Rs 321 (previous target: Rs 273) based on 13x FY20e earnings (forward peg: 0.7) over a period of 9-12 months.

Capacit'e Infraprojects: Buy | Target - Rs 397 | Return - 48%

Notwithstanding the recent turmoil in EPC stocks, business fundamentals of Capacit’e Infraprojects continue to strengthen—not only has the company entered the public sector space that widens its catchment area, it continues to bag repeat orders from multiple clients in the private sector.

With its book-to-bill crossing 5x, the company is set for robust growth (Building a reputation for quality; initiating coverage). We believe investors looking for quality companies with a proven track record, strong earnings potential (31 percent EPS CAGR over FY18–20), a lean balance sheet (negative net debt) and attractive valuations (13.3x FY20E EPS) should consider Capacit’e.

We expect steady topline growth, a stable margin trajectory and declining debt to drive 23 percent revenue CAGR and 31 percent EPS CAGR over FY18–20E (excluding BDD Chawls).

Additionally, rising scale and better cash flow will lend impetus to return ratios. We maintain Buy with a target price of Rs 397 assigning P/E of 20x to FY20E earnings.

MORE WILL UPDATE SOON!!

5 stocks that could offer 8-13% by August-end

Nifty trades below 10,640 levels, we expect the market to retest 10,550 levels which is an important support level for the market.

 

Trade war and political uncertainty in Europe’s biggest economy - Germany - kept equity markets under pressure for most part of Monday's session. Recovery in the last hour of trade in frontline stocks saw the Nifty erasing partial losses to close at 10,657 levels, down 0.53 percent for the day.

After Friday’s bounceback, the index has failed to show follow-through action on the upside. The index faced a hurdle at the rising support trend line, connecting lows of 9,952 and 10,418, which is now acting as resistance for the market. As long as the Nifty trades below 10,640 levels, we expect the market to retest 10,550 levels which is an important support level for the market.

On the upside, if Nifty trades above 10,705 levels, it can rally towards 10,810 levels where the falling resistance connects the highs of 11,172 and 10,929.

In Nifty options, 10,600 put is seeing the highest open interest suggesting the market has support between 10,550-10,600 levels.

Here is a list of top 5 stocks that could return 8-13 percent in the next 1-2 months:

Asian Paints Limited: Buy| CMP: Rs 1,293| Stop loss: Rs 1,250| Target: Rs 1,400| Return 8%

The stock has seen a base formation between the levels of Rs 1,260 and Rs 1,100 over a period of nine months and witnessed a breakout from the same to hit an all-time high of Rs 1,332 in the month of May.

The price then corrected down to the previous high of Rs 1,260 which has acted as a strong support for the stock and then bounced back. The stock has taken a support at its 50-days moving average and crossed 20-DMA.

In Monday’s session, the stock has shown price momentum with a long bullish candle and good volumes which suggests resumption of the uptrend.

The Relative Strength Index or the RSI on the daily chart has given a positive crossover with its average. The daily MACD has given a positive crossover with its average and moved above the neutral level of zero indicating corrective phase is over.

Thus, the stock can be bought at current levels and on dips towards Rs 1,280 with a stop loss below Rs 1,250 and a target of Rs 1,400 levels.

Infosys Limited: Buy| CMP: Rs 1,335| Stop loss: Rs 1,290| Target: Rs 1,450| Return 8.6%

The stock has seen a base formation between the levels of Rs 1,280 and Rs 900 over a period of two years. Last week, the price saw a breakout from this consolidation and hit a new high of Rs 1,340 in Monday’s session.

Typically, the stock breaking out at all-time highs continue to see new highs in the near future as well. The stock is taking support at its 21-days moving average and then started trending higher.

The price has also given a breakout from Bollinger band with the expansion of band and closed above the upper band. Thus, the stock can be bought at current levels and on dips towards Rs 1,320 with a stop loss below Rs 1,290 and a target of Rs 1,450 levels.

Godrej Industries Limited: Buy| CMP: Rs 618| Stop loss: Rs 585| Target: Rs 700| Return 13%

The stock has been in an uptrend on the long-term charts forming higher tops and higher bottoms on the long-term chart. For the last eleven months, the stock has been in a corrective phase and was trading sideways to negative in a narrow range of Rs 699 to Rs 512 levels.

The stock has seen a bounce back from Rs 550-512 zone on multiple occasions indicating a strong support zone for the stock. The daily MACD line has given positive crossover with its average suggesting stock is likely to see the start of a fresh uptrend.

The stock has moved above the falling resistance trend line connecting highs of Rs 699 and Rs 646 on the weekly chart and was consolidating above it for the last few weeks.

Thus, the stock can be bought at current levels and on dips to Rs 607 with a stop loss below Rs 585 for a target of Rs 700 levels.

Sundram Fasteners Limited: Buy| CMP: Rs 643| Stop loss: Rs 615| Target: Rs 720| Return 12%

The stock is in a long-term uptrend forming higher tops and higher bottoms on the daily chart and weekly chart. The stock has seen in a consolidation zone between the levels of Rs 645 and 545 odd levels over the last four months with a positive bias.

The price has been taking support at its 100-day moving average. The Relative Strength Index on the daily chart has given a positive crossover with its average suggesting that the stock is likely to see a breakout on the upside.

Thus, the stock can be bought at current levels and on dips towards Rs 635 with a stop loss below Rs 615 and a target of Rs 720 levels.

Indiabulls Housing Finance Limited: Sell| CMP: Rs 1,115| Stop loss: Rs 1,160| Target: Rs 1,020| Return 8.5%

The stock has formed a bearish head and shoulders pattern on the weekly chart. It witnessed a breakdown from the pattern in the month of May and then saw a bounce back towards Rs1,270 odd levels.

Here it faced some resistance at its 200-day moving average and then saw a resumption of the downtrend. Also, on the daily chart, the price has given a breakout from the Bollinger band with the expansion of band and closed outside lower band suggesting the start of a fresh trend in the direction of the breakout.

The price has been trading below its long-term as well as short-term moving averages. MACD line has given negative crossover with its average below neutral level of zero on the daily chart.

Thus, the stock can be sold at current levels and on the rise towards Rs 1,125 with a stop loss above Rs 1,160 and a target of Rs 1,020 levels.

MORE WILL UPDATE SOON!!

Kotak Institutional Equities introduces midcap portfolio: 10 stocks that could return 20-60%

Most companies on the list have either a buy or an add rating.

Warren Buffett once said be fearful when others are greedy and be greedy when others are fearful. Well something similar is happening in the small and midcaps space that has suffered some big cuts so far in 2018.

The Sensex is up 4 percent in 2018 compared to a 13 percent and about 17 percent fall in the BSE Midcap and Smallcap indices, respectively.

After the recent correction, Kotak Institutional Equities re-introduced its midcap portfolio focussing on 10 stocks. These include: Balkrishna Industries, CESC, Escorts, Federal Bank, Kalpataru Power Transmission, Laurus Labs, Max Financial Services, Prestige Estates Projects, Sadbhav Engineering and Shriram City Union Finance.

Most companies on the list have either a buy or an add rating by the brokerage. It set the most aggressive target price on Sadbhav Engineering, which has the potential to offer up to 60 percent return in the next 12 months.

We continue to follow a ‘barbell’ approach which is a mix of expensive ‘growth’ and inexpensive ‘value’ stocks noting extreme valuations across and within sectors. We introduce our midcap portfolio after the recent steep correction in valuations of midcap stocks. We still find valuations of midcap consumer stocks to be quite expensive and are avoiding the same despite their relatively better longer-term growth prospects," the brokerage said.

Valuations of the broader market are still expensive versus historical levels and bond yields despite projected strong growth in net profits over FY18-20 led by normalisation of profits in a few sectors and economic recovery.

The market’s valuations are largely supported by ‘growth’ stocks in consumption sectors while the valuations of remaining sectors are fairly reasonable and even attractive in a few cases.

There is deep value in several cases based on our fair valuations after the severe correction in those names in the past six months, it added.

It said global issues (trade, sanctions) still pose meaningful risks to India’s macros in case trade tensions were to escalate.

MORE WILL UPDATE SOON!!

June expiry may keep markets volatile this week; book profit on rallies

Given the small premium of 46-50, that the 10,850-CE governs, it would be worthwhile to buy it with possible targets around Rs 150-200 ahead of expiry.

  

Given the small premium of 46-50, that the 10,850-CE governs, it would be worthwhile to buy it with possible targets around Rs 150-200 ahead of expiry.

The last hour has seen market claw back the lost ground, in fact by closing up by around 5 point.

The major momentum that the Nifty is deriving is coming out of strength in certain heavyweights. While earlier it was banks, and now the momentum has shifted to IT pack and Reliance Industries which have come to the rescue.

We had categorically stated in our earlier outlook as well, that the midcap-smallcap are a strict no-no, given the intrinsic weakness in individual stocks and in indices as a whole.

We still stand by our hypothesis that the broader indices may further correct by around 5-7 percent. Hence, one could be looking at opportunities for exiting these scrips on any fruitful rise.

While in the last week, the Nifty50 candle showed upper shadow (Corrected from 10,893 to 10,817), the current week is showing a lower shadow (bounced from 10,701 to 10,821).

These shadows in a way define the immediate barriers placed between levels of 10,701-10,893. The monthly candle too is currently seen forming an “Inside Month”, which would mean that one needs to wait for the market to move past the extremities for a clear direction.

The market has remained in a sideways tranche for almost 3-4 weeks now, which indicates to a compression of the spring. The fact that Nifty is seeing support at lower levels and the strength amongst the heavyweights brings us to believe that market might make an attempt to take on lifetime highs over the next week or 10 days.

Given the small premium of Rs 46-50, that the 10,850-CE governs, it would be worthwhile to buy it with possible targets around Rs 150-200 (Around 11,000 on the Nifty).

As mentioned earlier we would prefer going with the frontliners and our picks are:

Cipla: Buy| CMP: Rs 615| Target: Rs 660| Stop loss: Rs 595| Return 7%

Kotak Mahindra Bank: Buy| CMP: Rs 1,320| Target: Rs 1,420| Stop loss: Rs 1,290| Return 8%

Asian Paints: Buy| CMP: Rs 1,268| Target: Rs 1,330| Stop loss: Rs 1,221| Return 6%

MORE WILL UPDATE SOON!!

Dollar woes! Rupee may hit all-time low if it breaks 68.10/$

Technically, 66.70 is an important support. Break of 68.10 would be essential for momentum to build upon the upside and this time around that could possibly lead to a new all-time low for the rupee against the US dollar.

  

Several recent global and domestic developments have led investors to take some risk off the table but they have not hit the panic button yet.

The flight of interest-rate sensitive flows has spooked debt and currency markets but equities have been fairly resilient so far, especially the benchmark indices.

Gradual withdrawal of USD liquidity and rate hikes by the US Federal Reserve has caused cracks in several EM economies, especially those with weak current account positions and looming political concerns.

The Argentine Peso, Brazilian Real, Mexican Peso, Turkish Lira, Russian Ruble and more recently the South African Rand have all depreciated significantly.

Many central banks have responded by hiking rates to combat the outflows and some are considering and in fact, would be compelled to do so.

The Rupee too has seen significant depreciation pressure. In April and May put together, FPIs have pulled out net USD 3 billion and USD 1.5 billion out of debt and equity markets, respectively. FPI limits in debt that were close to full utilisation now stand at 70 percent.

The RBI has used its FX Reserves well so far to ensure that a runaway move does not happen in the Rupee. It has intervened with intent in OTC as well as exchange-traded futures to crush speculative longs.

This explains why the volumes have not spiked up to the extent they usually do and as has been seen on instances when Rupee has depreciated in the past. The RBI in its June monetary policy managed to restore the confidence of market participants as it hiked the repo rate by 25 bps while keeping the policy stance neutral.

The hike is preemptive in nature considering inflationary pressures mainly on account of higher crude prices and hikes in MSPs and is consistent with the RBI’s inflation targeting framework.

Funding the twin deficits at this point is the major challenge on the domestic front. The CAD for FY19 is likely to be around USD 70 billion.

FPI outflows and the slowdown in FDI and foreign currency borrowing is likely to leave a hole of around USD 15-20 billion in BOP (unless the tide turns and capital again starts flowing back into EM economies). This is the major risk for the rupee.

On the fiscal front, as we head into an election year, the government can ill afford to cut down on spending. Government spending was the major contributor to the Q4 GDP growth that came in at 7.7 percent.

With GST revenues not yet stabilised and Air India divestment not likely to go through, there are risks of fiscal slippage. Nationalized banks have not been buying duration as they would not want to squander away the precious resolution capital in MTM losses.

Private banks’ demand for duration could also reduce as the RBI has increased the FALLCR carve out from SLR. FPIs too are not utilising their debt limits to full capacity.

The concern, therefore, is how will the supply be absorbed. (The yield on the 10-years benchmark touched 8 percent briefly on Friday and is 175 bps above the repo rate).

The RBI would have to do so through OMO purchases to the tune of Rs 1,20,000 crore. Until the announcement of further OMOs, domestic bonds could continue to remain under pressure.

RBIs decision to change the valuation of SDLs to market linked rates from flat 25bps over corresponding tenor G-sec could reduce demand for SDLs as well, further widening the supply-demand gap.

Whether the concerns on both the above deficits exacerbate or recede would depend to a large extent on where crude prices head from the current level.

On a positive note, with the output gap closing and supply chains getting repaired post the shocks of demonetisation and GST, we can see a pick up in private CAPEX and exports. Quick resolution of NPAs is vital to ensure that capital is available for banks to be able to lend to fund this CAPEX.

On the global front, trade-related tensions, developments in Spain and Italy, and Brexit related headlines would continue to set the tone for risk sentiment. The US has extended tariffs to its allies Mexico, Canada, and EU as well. Any retaliatory tariffs imposed by EU could further escalate trade tensions.

On the Brexit front, EU chief negotiator Barnier had commented recently that the backstop would be applicable only to Northern Ireland and not the whole of UK. This would be unacceptable to the UK government, as it would imply having a border within the UK.

The House of Commons is scheduled to vote on amendments suggested by the Lords on Tuesday, which were intended to give the parliament more control over the Brexit negotiation process rather than the cabinet.

Theresa May does not have a majority in the Commons and a few pro-EU conservatives could even side with labor in the vote to keep the amendments in place. With all the uncertainty around, Sterling is likely to remain extremely volatile and headline driven.

The right-wing parties Northern League and M5S together formed a government in Italy. The pickup in expenditure and tax cuts due to populist policies of this government would risk destabilizing the EU.

The Spanish parliament toppled Prime Minister Rajoy through a no-confidence vote and the new PM Pedro Sanchez is a socialist. Any departure from fiscal prudence in peripheral economies would not go down well with Germany or Brussels.

It would be important to track the yield spread between Italy and other peripheral nations against the yield on corresponding maturity German Bunds. Any unusual spike in yields spreads would be negative for the Euro.

To summarize, on the domestic front, The RBI has been preemptive and has ensured that Rupee depreciation does not hit headlines and create panic. It intervened aggressively even before Rupee could hit an all-time low.

Whenever Rupee depreciation has been out of whack with other Asian/EM currencies, the RBI has intervened to align the rupee with its peers.

The RBI may endeavor to keep the rupee somewhere in the middle of the EM pack and may allow gradual depreciation of the Rupee if global USD strength continues.

Technically, 66.70 is an important support. Break of 68.10 would be essential for momentum to build upon the upside and this time around that could possibly lead to a new all-time low for the rupee against the US dollar.

MORE WILL UPDATE SOON!!