Ashish Chaturmohta, Head of Derivatives and Technical Analysis, Sanctum Wealth Management
The sentiments are positive and the markets outlook continues to be positive. It is also pertinent to note that, for the first time, Dow Jones closed above 35000 for the first time in history, indicating the strong bullish trend, Ashish Chaturmohta, Director Research, Sanctum Wealth Management said in an interview with Moneycontrol’s Kshitij Anand.Q) What a week for Indian markets despite volatility amid weak global cues. Nifty managed to hold 15800 – what led to the price action?
A) In April, and May and some days of June, India was going through the tough times of the 2nd wave of COVID as compared to the other nations which had witnessed things getting back to normal.
Continuing further, last week there was global correction owing to fears of rising covid cases in the US, as well as UK, etc. This created a lot of volatility in the markets. However, India recovered strongly from the 2nd wave and things kept getting better, which kept the market stable.
Additionally, this week was action-packed with various companies reporting their quarterly earnings that turned out to be mostly inline and a few above expectations.
Q) What are your views on broader markets?
A) The broader markets are in a positive trend. Globally, in the US markets, various companies will start reporting their Q2 earnings, which will keep the street excited.
Overall, the sentiments are positive and the markets outlook continues to be positive. It is also pertinent to note that, for the first time, Dow Jones closed above 35000 for the first time in history, indicating a strong bullish trend.
Q) FIIs flows turned net negative in July, Domestic Institutional Investors remained net buyers. SIP flows to mutual funds is also holding up well resulting in fairly balance institutional flows. These are some of the factors holding liquidity – but what is making FIIs nervous?
A) In H1FY21, FIIs had been sellers till Nifty entered 10,000 levels. Post that, FII become buyers and continued their buying with a lag. Hence, FIIs, are on a profit booking spree however, I expect to become buyers soon.
We also need to understand one thing that India is a small portion of FIIs. India is part of the emerging markets portfolio, hence the inflow and outflow would continue.
Q) Two IPOs will hit D-Street for subscription next week – Glenmark Life Science & Rolex Rings. Which one is a better play for long-term investment in case someone want to invest only in one IPO? Firstly just a few lines on the above two IPO -
Glenmark Life Sciences:
Glenmark Life Sciences is 100%, a wholly-owned subsidiary of Glenmark Pharmaceuticals Limited. The company is a leading developer and manufacturer of select high-value, non-commoditized active pharmaceutical ingredients in chronic therapeutic areas, including cardiovascular disease central nervous system disease, pain management, and diabetes.
It also provides contract development and manufacturing operations (CDMO) services to a range of multinational and specialty pharmaceutical companies.
The total issue size is of Rs. 1514 crore (at Rs. 720/share). It includes a fresh issue of Rs 1060 cr and an Offer for Sale (OFS) of Rs 454 cr. The company's market cap would be 8740 cr post issue. In the year FY21.
With 144,750 MTPA installed capacity, it has the 5th largest forging capacity in India with 60 customers across 17 locations. The Company significantly improved its financial profile with the debt-equity ratio improving from 3.23x as at March 31, 2018 to 0.80x as of September 30, 2020.
The company supplies its products to both domestic as well as international automotive companies and leading bearing manufacturers such as SRF India, Schaeffler India, Timken India, etc.
All major capex has been done in the past hence no new capex is required. The company is not planning any major capex in till FY25. They would increase revenue by increasing capacity utilization.
They are planning to increase forging utilization to 60% and machining capacity to 85%( which would generate an incremental capex of Rs90 crore). Revenue and EBITDA margin was impacted due to unfavorable demand scenario due to Covid 19.
In the next five years, till FY25, the company can grow ~10-12% YoY. The total issue size is of Rs. 700crore (at Rs. 860/share). It includes a fresh issue of Rs 70 cr and an Offer for Sale (OFS) of Rs 630 cr.
Both belong to different sectors; however, Rolex Rings is a play towards the Auto industry whereas Glenmark Life sciences is a pure-play on pharma couples with CDMO.
In my view, Glenmark should be subscribed owing to the strong parent capabilities and constant growth over a longer period of time.
Q) Bumper listing from Zomato last week. Zomato is much bigger than QSR industry’s combined Mcap. Do you think the gains will stay? What should investors do?
A) Zomato is a platform which is connecting the customer and the seller pan India. Today, each and every QSR is directly or indirectly dependent on Zomato for online food orders etc, which has caught massive traction during covid times.
Hence, Zomato would continue to trade at a premium. Zomato is a play on increasing online ordering, penetration of online ordering pan India, etc.
The listing has been a stellar one and ended at a market cap just nearing Rs 1 lakh crore. Investors should stay invested and it is a buy-on dips candidate for long-term purposes.
Q) Your 3-5 trading ideas for the next 3-4 weeks?
A) Here is a list of top trading ideas for the short term:
Infosys: Buy| LTP: Rs 1590| Target: Rs 1800| Stop Loss: Rs 1540| Upside 13%
Infosys in its recent quarter guided for a Revenue growth from 12-14% to 14-16%. The margin guidance has been retained at 22-24% owing to the fact that a wage hike will occur in Q2FY22 and certain post-COVID costs are expected to return from Q3FY22 onwards.
Infosys is at fair value at current levels. Technically, the stock is in an uptrend forming higher highs and higher lows. For the last 4 weeks, it has been consolidating at all-time high levels.
Now, it (Infosys) is showing signs of a breakout and which led to the resumption of the uptrend. The stock can be bought at current levels with a stop loss of 1540, and a target can be placed at Rs 1800.
Tata Steel: Buy| LTP: Rs 1281| Target: Rs 1450| Stop Loss: Rs 1225| Upside 13%
Tata Steel Limited is a diversified steel producer. The Company is engaged in the business of steel making, including raw material and finishing operations.
Tata steel is getting traction owing to Chinese companies reducing their production in order to comply with government norms followed by, higher domestic/export realization for India operations; and sustained focus on deleveraging.
Price-wise, the stock is in a major uptrend. Over the last couple of months, the stock has formed a short base and gave a breakout. The stock can be bought at current levels with a stop loss of Rs 1,225, and a target of Rs 1,450.
Jubilant Ingrevia: Buy| LTP: Rs 629| Target: Rs 725| Stop Loss: Rs 595| Upside 15%
Jubilant Ingrevia is a demerged entity from Jubilant Life sciences. Ingrevia guided for Rs 950 cr in the Capex across all segments, in the next 3 yrs.[Net block - 1800 cr (FY21)]*
The CAPEX is targeted towards key growth areas such as Diketene derivatives, CDMO, Agro-ingredients and Nutrition pre-mix plant which should enhance the overall margin profile of the company.
On this count, the company has guided for EBITDA margins to increase to~20% over the medium term from~17% in Q4FY21. Technically, the stock is in an uptrend making higher highs and higher lows on the daily chart since listing.
After 6 weeks of consolidation, the stock has given a breakout with huge volumes indicating buying participation. The stock can be bought at current levels with a stop loss of 595, and a target of 725.
ICICI Bank: Buy| LTP: Rs 676| Target: Rs 775| Stop Loss: Rs 640| Upside 14%
ICICI Bank offers banking products and financial services for corporate and retail customers through a variety of delivery channels and specialised subsidiaries in the areas of investment banking, life, non-life insurance, venture capital, and asset management.
The bank has a network of 5,275 branches and 15,589 ATMs across India and has a presence in 17 countries.
For the last 5 months, the stock was trading sideways to a negative correction after the sharp run it had seen.
Now, the stock is trading at breakout levels and is showing signs of resumption of the uptrend. The stock can be bought at current levels with a stop loss of 640, and a target of 775.
Godrej Properties: Buy| LTP: Rs 1560| Target: Rs 1800| Stop Loss: Rs 1490| Upside 15%
The company is currently developing projects that are estimated to cover more than 89.7 million square feet. Godrej is targeting sales of Rs100bn in FY23 (from Rs65bn in FY21).
Currently, it is a unique opportunity for consolidation – there is stress on the supply side (developers), but at the same time, the demand environment has improved.
Further, aggressive land acquisition strategy wherein, it plans to fully deploy Rs37bn in equity funds raised in 4Q towards new project acquisitions over FY22-23.
For the last 7 months, the stock price has been consolidating its gains between 1570 and 1200 odd levels. Sustaining above 1570 levels, we expect the uptrend to continue. The stock can be bought at current levels with stop loss of 1490, and a target of 1800.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.