Plenty of opportunities in India's $2 trillion market; 10 stocks to buy on dips
At Wednesday's close of trade, the total market capitalisation of BSE-listed companies was at USD 1.99 trillion.
The stock market investor wealth surged to USD 2 trillion this week, following a dream run in share valuations that has propelled the benchmark Sensex to a new peak of 30,692.45 on Wednesday.
At the close of trade on Wednesday, the total market capitalisation of BSE-listed companies closed at Rs 1,27,82,228.06 crore (USD 1.99 trillion), it stood at Rs1,27,90,255.16 on Tuesday.
The BSE 30-share index Sensex has gained 15 percent so far this year and has touched its record high of 30,692.45 on Wednesday, supported by a huge gush of liquidity from both domestic as well as global investors.
However, after a strong run-up so far in the year, benchmark indices started on a muted note on Thursday following a selloff in US markets overnight. However, the structural story remains intact and investors should use dips to buy into this market.
“The Indian market may hardly have time to celebrate its entry into the US$2 trillion m-cap space and its rising contribution to global market cap and GDP. A series of negative news from the White House is roiling global markets,” Amar Ambani, head of research, IIFL Private Wealth said in a note.
“Doubts are being raised about President Donald Trump’s ability to implement market-friendly policies. The fear gauge, which hit multi-year lows just a week ago, saw its biggest spike which was last seen after Brexit vote last June,” he said
The Nifty50 too surged to a record high of 9,532.60 on Wednesday in a range bound trading session even as global markets took a breather. The index is on course to achieve higher highs and every dip is more likely to get bought.
The bias continues to remain positive as the index is forming higher high higher lows on the weekly scale. However, the up move in last two weeks has pushed short-term momentum oscillators into overbought territory thereby warranting a round of consolidation going forward, suggest experts.
“The immediate target of 9,550 being the measuring implication of the bullish flag pattern on daily chart. The bias continues to remain positive as the index is forming higher high higher low on the weekly scale,” Dharmesh Shah – Head Technical Designation - AVP at ICICI Securities Ltd told moneycontrol.
“The immediate support base for the index is placed at 9,300 as it is the 50 percent retracement of current up move and the higher low formed in a previous week. We believe any breather towards the same should be used as fresh entry opportunity,” he said.
We have collated a list of 10 stock ideas based on technical and fundamental factors from different experts with a time horizon of up to 1 year:
Analyst: Dharmesh Shah – Head Technical Designation - AVP at ICICI Securities Ltd
Larsen & Toubro: BUY| Target Rs2,035| Stop Loss Rs1610| Upside 16%| Time Frame 6 months
The sideways consolidation over the last three weeks represents a pennant formation on the daily chart. A pennant formation is a bullish continuation pattern marking a breather after the strong rally and provides fresh entry opportunity.
Recently, the stock has signalled a bullish structural turnaround after registering breakout from a healthy corrective phase of two years between 2015 and 2016. The steady up move since the start of this year has seen the stock post a faster retracement of the July-December 2016 fall (Rs1615 to Rs1302) as the five-month decline was completely overhauled in less than four months.
Faster retracement of the major down move and formation of higher high and higher low on the monthly/quarterly scale indicates conclusion of the two-year corrective phase and resumption of the primary uptrend.
Apollo Tyre: BUY| Target Rs270| Stop Loss RS218| Upside 14%| Time Frame 6 months
The share price of Apollo Tyres remains in a strong uptrend forming higher highs and higher lows representing persistent demand at elevated levels. The recent price action highlights that the stock is rebounding from a major breakout area indicating resumption of the primary uptrend thereby providing a fresh entry opportunity
The strong up move in March & April 2017 propelled the stock past the neckline of rounding pattern placed around the Rs220 region, which also coincides with the breakout area from the long-term downward sloping trend line joining the highs of February 2015 (Rs249) and October 2016 (Rs234) during April 2017.
The breakout above the major technical pattern signals the conclusion of the corrective phase and resumption of the primary uptrend. The temporary pause after a sharp rally has helped it to work its way out of the overbought condition and in the process built a higher base.
We expect the stock to resolve higher from here on and test levels of Rs270 being the measuring implication of the rounding pattern breakout.
Rallis India: BUY| Target Rs295| Stop Loss Rs221| Upside 20%| Time Frame 6 months
The share price of Rallis India remains in a strong uptrend forming rising peaks and troughs on the long term charts. Recent developments on the price front suggest that the stock has concluded an elongated corrective phase and is poised to embark upon its next major up move thereby providing a fresh entry opportunity.
The entire corrective price action over the past two years took the pictorial form of a well defined ‘Cup & Handle’ pattern as highlighted in the adjoining chart. A Cup & Handle formation is a bullish continuation price pattern having a positive implication on the price front upon resolution above the neckline of the pattern.
After registering a strong volume-led breakout from the bullish cup & handle pattern above Rs230 in early February 2017, the stock has been consolidating precisely above the breakout area over the last three months. We believe this consolidation above major breakout area has laid the platform for the next up move.
Inox Leisure: BUY| Target Rs320| Stop Loss Rs270| Upside 12%| Time Frame 1 month
The share price of Inox Leisure has registered a breakout above the neckline of rounding pattern placed around Rs286. A rounding formation within an uptrend is considered a bullish continuation pattern, which marks a healthy corrective phase as prices work off the overbought conditions developed after a strong rally before the resumption of the primary uptrend.
The stock registered a resolute breakout above the neckline of rounding pattern in April 2017 and thereafter has been consolidating above the breakout level over the last four weeks suggesting a higher base building process that will act as launch pad for the next up move.
The recent higher trough of 270 is placed at 61.8% retracement of the last rising segment and the breakout area of March 2017 consolidation making it a good value area for the stock in the short term.
Analyst: Rohit Singre, Senior Research analyst, Bonanza Portfolio Ltd
Aditya Birla Fashion: BUY| Target Rs 208| Stop Loss Rs 163 | Upside 15%
The stock was consolidating in the past one year and registered a breakout in mid-April as it gave close above the consolidation area.
Recently, we have seen very good buying interest in the stock at breakout levels suggesting participant is trying to enter at breakout zone. The stock has not moved as of now and we expect it to react on the breakout.
On weekly charts, we have noticed a bullish flag pattern which is considered a continuation pattern. The momentum oscillator such as the relative strength index (RSI) is currently reading near 63 levels which is again considered to be bullish.
Traders can initiate buy call on the counter as we expect the stock to move towards Rs208 levels in the near-term and keep a stop loss below Rs163 on a closing basis.
SRF: BUY | Target Rs 1970 | Stop Loss Rs 1750 | Upside 8%
The stock was on the radar since it has given a strong breakout in late April with decent volume. If we look at the daily chart, the stock has given a decisive breakout from its bullish flag pattern and prices have moved higher with increasing volume confirming a break.
On the weekly chart, the stock is trading in rising channel pattern and recently it bounced back from lower band of the channel. The momentum indicator, RSI, currently is trading near 65 level which is considered to be a bullish zone.
By considering a technical setup, Bonanza recommends a buy on stock at a current market price or on decline up to Rs1,780 for the targets of Rs1,970 and keep a stop below Rs1,750 on the daily closing basis.
Triveni Turbine: BUY| Target Rs 161| Stop Loss Rs 126 | Upside 15%
Triveni Turbine gave a decisive breakout from its ‘Cup and Handle’ pattern six weeks before. Volume activity too picked up during the price movement.
The stock has become very active since the breakout and is closing above the same by forming reversal candle pattern, which we believe is a pullback before starting the next leg of the rally.
On the flip side, the stock has a strong resistance near Rs151 level which is at its lifetime high, and breaking above the same will unfold fresh targets for the stock.
Thus, bonanza recommends a buy call on the script at the current price to any decline up to Rs135 levels with targets of Rs161 and keeping a stop loss below Rs126 on a closing basis.
Mahindra Holidays: BUY | Target Rs 550 | Stop Loss Rs 420 | Upside 16%
Mahindra Holidays & Resorts (MHRIL) has registered a ‘Cup and Handle’ breakout on the daily chart around Rs460 levels and we witnessed volume activity also zoomed along with price confirming the breakout.
If we look at border chart, we can see that it has been trading in rounding bottom formation which is again bullish pattern. On the weekly chart, after giving a double bottom breakout, stock changed its downtrend to a short uptrend.
If we look at the current chart, stock rising in uptrend channel by forming a higher high higher low pattern which is considered to be a bullish continuation pattern. Momentum indicator RSI reading near 61 which is again bullish zone.
We expect prices to march towards Rs550 levels in near term so one can initiate a buy position on the counter with keeping stop out below Rs420 levels on closing basis.
Engineers India: BUY| Target Rs 195 | Stop Loss Rs 160 | Upside 13%
After making low at Rs72 levels in March 2016, the stock has resumed its uptrend and we have seen a very good rally in the stock.
If we look at weekly charts, the stock has broken its bullish flag pattern twice and reacted technically. If we consider current chart structure, we can see that one more bullish flag formation is forming on the charts which is about to breakout.On the broader charts, the stock has also broken above its double bottom formation above Rs162 levels hinting more fresh levels in the near future. Even on longer time frame charts are looking very good as the stock has given a break on the monthly chart as
Considering above technical evidence, Bonanza recommends a buy call on the stock at a current price to any decline up to Rs165 levels for the targets of Rs195 and a stop loss below Rs160 on a closing basis.
Brokerage Firm: Edelweiss
Sobha: Target Rs 520| Upside 22%| Time Horizon 12 months
Edelweiss Securities Ltd maintained its buy rating on Sobha but raised its target price from Rs410 to Rs520 earlier post Q4 results.
The brokerage firm expects Sobha’s operations to scale up in view of the steady execution of ongoing projects and expected an uptick in Bangalore residential demand driven by strong office space leasing in past few years coupled with better affordability.The company also has a well-diversified land bank, quality management, stable balance sheet and earns steady cash flows from the contractual business. It raised FY18E real estate NAV to Rs640 (Rs573 earlier) and our new target price is Rs520 (Rs410
The revision is led by improved demand outlook, lowering of discount rate and tailwinds from affordable housing benefits. Maintain ‘BUY’.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.