Moneycontrol
Jul 18, 2017 09:22 AM IST | Source: Moneycontrol.com

Profit booking grips market; Top 15 ‘safe bets’ to buy even after strong rally in 2017

The Nifty too is chasing 10,000 level which is likely to act as stiff resistance for the index and market should cool off post the event, suggest experts. However, a major decline is not something which analysts’ see unless it gets triggered by a global event.

Profit booking grips market; Top 15 ‘safe bets’ to buy even after strong rally in 2017

Kshitij Anand

Moneycontrol News

The S&P BSE Sensex is trading in unchartered waters and allocating fresh money at these levels could be one of the toughest decision to make for any investor as chances of profit booking cannot be ruled out.

The Nifty too is chasing 10,000 level which is likely to act as stiff resistance for the index and market should cool off post the event, suggest experts. However, a major decline is not something which analysts’ see unless it gets triggered by a global event.

“The market psychology is defensive at this time since almost all participants are positioned for a correction. This is giving some cushion on the downside. In all likelihood any correction will be on account of global developments and not local ones,” Anshul Saigal - Senior Vice President and Portfolio Manager – Kotak Mutual Fund told Moneycontrol.

Considering the fact that Indian market is dancing on tunes of global liquidity and any knee-jerk reaction in global markets could also pull Indian markets lower. Indian market is already trading in overbought zone and at a trailing P/E of 25x which was last seen in 2010, and 2008.

“10,000 on Nifty is a huge technical resistance and Sensex/Nifty P/E’s are also hitting 25x so from both angles investors should be cautious especially since when both these factors reach resistances then there is usually a good 10-15 percent decline over the next few months,” Rishi Kolhi, CEO, ProAlpha Capital told Moneycontrol.

“Also, there are global inter-market divergences with some indices like India’s hitting new highs while many are below their previous highs and this has also been a good signal for a halt to the uptrend in the past,” he said.

Kolhi advises investors to use the up move to book profits and re-enter in the decline where one can start investing at 9,500.

The ideal strategy for investors would be to pick up quality names on declines because the bullish sentiment is likely to continue in the market. With the no initial hiccups in the GST implementation, indirect tax collection is expected to improve going ahead.

The direct tax collection figures were also good in the first quarter of the current fiscal with personal advance tax increasing by 40 percent, suggest experts.

“While this is a long term story, the short term story is the possibility of rate cut fuelled by the weak IIP data and lower inflation,” Shrikant Akolkar, Sr. Equity Research Analyst, Angel Broking Pvt Ltd told Moneycontrol.

“The market is trading between 18-19x of its one-year consensus forward earnings and investors should stick to the quality companies. While we are optimistic, profit booking may give fresh buying opportunities in the quality companies,” he said.

Here is a list of 15 quality stocks which analysts’ feel are a good buy even at current levels:

Analyst: Jay Purohit, Technical & Derivatives Analyst at Centrum Broking Limited

Fortis Healthcare: BUY

The pharma space is going through a tough time from last few months. In line with the peers, the ‘Fortis Healthcare’ too seen a decent correction in the recent past.

Investors can take a long entry in the counter on every decline towards the mentioned zone for an upside target of Rs200 – Rs215 in the upcoming quarter. The stop loss should be kept below Rs135 on a closing basis.

Apollo Hospitals: BUY

The stock is moving in a sideways direction from last few months and currently rebounding from the Potential Reversal Zone (PRZ) of a Bullish Harmonic Pattern named as ‘Bullish Gartley’ on the daily chart.

The ‘RSI’ oscillator has turned northwards from its support of 30-35 on the daily chart, indicating strength in the counter. Thus, we advise traders to go long in the stock on every decline towards Rs1230 for a target of Rs1325 – Rs. 1340. The stop loss for the trade should be kept at below Rs1305.

Reliance Industries: BUY

After a decent rally from 1013 to 1467, the stock has started moving in a sideway direction. However, in last week, we witnessed a breakout from the consolidation phase of the last couple of months.

The breakout supported by healthy volumes and thus suggesting a sustainable move in the upcoming session. The ‘RSI’ oscillator, which measures the stock momentum, has given a trend line breakout on the daily chart, indicating strength in the counter.

Considering the above mentioned technical evidence; we are expecting a continuation in ongoing momentum in near term too. Hence, we advise traders to buy this stock for a target of Rs 1630 - 1650. The stop loss should be fixed at Rs 1460.

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

Ujjivan Financial: BUY

The stock has made a ‘Double Bottom’ pattern and has started rebounding from last few sessions. After many weeks, we witnessed a ‘Higher Highs Higher Lows’ formation on the daily chart of the stock, indicating bullishness in the counter.

Going forward, we are expecting the stock to reach towards Rs390 – Rs400 in near term. Thus, traders are advised to initiate long positions with a stop loss of Rs317.

Marico: BUY

The stock is moving in a strong uptrend by maintaining ‘Higher Highs Higher Lows’ on the weekly and monthly chart. From last three months, the stock was moving in a sideways direction and Thursday, we witnessed a breakout from the consolidation phase.

Since moving averages and momentum oscillator is also indicating strength in the counter, we are upbeat on the stock for a target of Rs. 360 – 365 in near term. The protective stop loss should be kept below Rs 314.

Analyst: Hemang Jani, Head - Advisory, Sharekhan

HDFC Bank: BUY

HDFC Bank has a pre-eminent presence in the retail banking segment (50% of loan book) and has been able to maintain a strong & consistent loan book growth, gradually gaining market share.

Also, as lending and transactions through formal routes increase, HDFC Bank would benefit since it is a leading private sector bank and it is likely that it will gain market share in this segment.

The bank is likely to maintain a healthy RoE of 18-20% and ROA of 1.8% on a sustainable basis. Therefore, we expect it to sustain the valuation premium that it enjoys vis-à-vis other private banks.

IndusInd Bank: BUY

IndusInd Bank has maintained its asset quality despite sluggish economic growth and a higher proportion of retail finance in its loan book. A likely revival in the domestic economy will further fuel growth in the bank’s consumer finance division while strong capital ratios will support future growth plans.

Though demonetisation has raised questions regarding delinquencies in certain lending segments, the management expects the asset quality to remain under control. The stock should continue to trade at a premium valuation, underpinned by strong loan growth, quality management, high RoAs and healthy asset quality.

ITC: BUY

ITC’s cigarette business, which contributes about 80 percent to the company’s EBITDA, continues to be the cash cow. With reduced concerns about the core cigarette business and comforting valuation (discount vis-à-vis some of the large cap FMCG players), ITC is one of the best picks in the FMCG space.

Maruti Suzuki India: BUY

Maruti Suzuki India (Maruti) is India’s largest passenger vehicle (PV) manufacturer with a strong 47 percent market share. The ramp up of Gujarat capacity would enable Maruti to clock volume growth of 12.6 percent in FY2018 which is higher than the estimated industry growth of about 8-10%.

Maruti continues to remain our top bet in the automotive space given the sustained trend of outpacing the passenger vehicle industry growth and advise investors to accumulate the stock in event of price volatility.

Reliance Industries: BUY

Sharekhan expects Reliance Industries’ (RIL) GRM to remain strong at $10.9/11.7 per bbl in FY2018/FY2019 given the robust global oil demand growth outlook for 2017 at 1.3-1.4mbpd (International Energy Agency estimate).

The domestic brokerage firm expects EBITDA/PAT CAGR of 21%/9% over FY2017-FY2019E, driven by the commissioning of the core downstream projects in FY2018. Any positive surprise in terms of better-than-expected financials of the Telecom business would be an important re-rating trigger for RIL going forward.

Analyst: Dinesh Rohira, Founder & CEO, 5nance.com

Mahindra and Mahindra: BUY

With robust products in the pipeline and strong marketing plan for recently launched products in SUV segment, the company is expected to regain the market share by 10 per cent.

The company also plans out to focus on exiting power brands to enhance market breath. It is expected to register volume growth in Tractor and UV segment on the backdrop demand increase from the rural segment.

ADF Foods: BUY

With stronger fundamental in terms of business model and niche product offering the company has consistently delivered a growth in terms of revenue generation.

With less debt on its balance sheet & increasing cash flow from operating activities, it is expected to expand its geographical presence across the rural & urban segment. The company is also a benefiter of the GST regime, monsoon and reviving rural expenditure.

Transport Corporation of India (TCI): BUY

TCI is one of the organized players in logistics segment and one of the sole benefactor by the changing tax regime. This changing regime will enhance the warehousing and supply chain management business with all sectors expected to route through a single pipeline.

Havells India: BUY

The recent acquisition of Lloyd business by Havell’s is expected to increase the consumer base in long term. Being a one of the pivot player in the electrical segment the company will expect to witness the volume growth coupled with increased revenue generation.

The company is also expected to witness revenue flow from its premium product offered to industry customer.

EID Parry: BUY

The Sugar industry witnessed a turnover in a recent development on import free duty which is expected to ease the price for domestic companies. EID Parry Ltd will be key recipient with low-cost materials.

With value addition and cost control, EID Parry reported a strong growth on bottom-line in last quarter. EID Parry is expected to continue with this trend improving macro fundamental.

Brokerage Firm: Edelweiss Financial Services

MCX: BUY

Q1FY18 marked another quarter of soft volumes post demonetisation for Multi Commodity Exchange of India (MCX) – ADTV fell 24% YoY/3% QoQ to Rs188bn. However, better yield realisation of Rs2.24/lakh and controlled opex supported earnings.

Positively, post-GST implementation, some uptick in volumes was witnessed. With volumes being a key driver of earnings growth, there is a similar cut in earnings as well. Given structural volume growth visibility (though now deferred beyond FY18), operating leverage benefits and MCX’s entrenched leadership, we assign 36x earnings multiple giving us a fair value of Rs 1,310 for the stock.

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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