Manali Bhatia Rudra Shares & Stock Brokers
As expected initial pullback finally fizzled out at the key resistance level of 10,700-10,750. The benchmark indices fell sharply in the last two days of the past week with Nifty shedding around 400 points from the week's high to close at 10,303.6 against the previous week's close of 10,472.5.
Bears tightened the grip after Brickwork downgraded realty developer Supertech. It further deteriorated the HFCs sentiments—Indiabulls Housing Finance and DHFL closed the week with a loss of 26 percent and 28 percent respectively.
For the week ahead, choppiness is likely. Unwinding in 10,400 and 10,500 Put options with approximately 9.75 lakh and 8.65 lakh change in open interest (OI) and writing in 10,400 and 10,600 Call options with significant volume suggest resistance is shifting towards the downside. While writing in 10,200 Put option suggesting support at lower levels.
Technical chart and options data suggest that 10,130-10,600 is the range we could be trading in this week. 10,130 will act as major support level which if broken could lead to a further downside towards 9,950-9,843. On the other hand, 10,488 and 10,650 will act as major resistance.
Bearish candlestick pattern and momentum indicators suggest that bulls are likely to struggle at higher levels. VIX is trading at 19.79 indicating volatility will remain a concern for traders.
Latest September trade deficit has narrowed to $13.98 billion, substantially dropping from $18.2 billion and $17.39 billion in July and August respectively.
The Current account deficit (CAD) is partly offset by the net receipt of services, secondary income and primary income of around $30-33 billion every quarter (around $10-11 billion every month). Therefore, the remaining deficit of $3-4 billion on monthly basis is quite manageable in the current situation where crude oil is on higher side with growing volumes.
Going forward, if these measures sustain and work well- though is a tough nut to crack. It would be a positive for the Indian economy as GDP is already in growing path and also, given government sticks towards its fiscal deficit target of 3.3 percent.
Further, concerns regarding the tightening of H1- B visa norms and liquidity crisis for HFCs may negatively impact the IT sector and HFCs. Hence, we recommend, stay away from HFCs and IT sector in this week.
Hero Motocorp, HDFC Bank, SBI Life has delivered numbers in line with our estimates. Furthermore, upcoming results of Asian Paints, Adani ports, HCL Tech, Maruti Suzuki, ICICI Bank, etc. will be under the radar. Summing up, in the last week, we couldn't see major downfall due to improvement in trade deficit and rupee appreciation. However, volatility may persist in the market.
Here is the list of five picks which could give 13-47 percent return in short-to-medium term:
HDFC Standard Life Insurance: Buy | CMP: Rs 370 | Target: Rs 430 | Return: 16 percent | Medium term
HDFC Life delivered strong Q1FY19 numbers. On the back of new ties, strong positioning, widespread adoption of smartphone and bank to deepen its bancassurance relationships, it is well poised for future growth.
we estimate VNB to grow at 20-25 percent CAGR in the next year. We value HDFC life at Rs 430, which corresponds to 5.5x of Q1FY19 embedded value.
Owing to strong corporate governance and its strong position, HDFC Life enjoys higher valuation.
Bhageria Industries: Buy | CMP: Rs 310 | Target: Rs 455 | Return: 47 percent | Medium term
Bhageria's has delivered robust results in Q2. Revenue rose by 38 percent, while EBITA rose by 91 percent, and PAT grew extremely well at 165 percent (YoY).
EBITDA margins for the quarter grew to 38.87 percent from 27.52 percent , PAT margins also grew 23.2 percent as against 11.9 percent YoY. Exports also contributed to around 44 percent of revenues (benefitted by rupee depreciation).
Moreover, long-term debt for the company is negligible and short-term borrowings reduced to around Rs 38.52 crore in Q2 from Rs 72 crore. Working capital for the company is also maintained.
Considering geographical expansion and addition of new clients will bring in additional revenues in future. We estimate FY19E EPS at Rs 45.5 and FY19E P/E at 10x, share price turns to Rs 455.
Sun Pharma: Buy | CMP: Rs 609.95 | Target: Rs 694 | Stop Loss: Rs 575 | Return: 14 percent | Short term
The stock is trading at 38.2 percent retracement of recent swing move and available at support zone of Rs 590-600.
Prices has taken support at 20-DMA on the weekly chart and formed a bullish Doji candlestick pattern. RSI is suggesting that stock is ready for fresh up move.
SBI Life: Buy | CMP: Rs 563 | Target: Rs 675 | Stop Loss: Rs 541 | Return: 20 percent | Short term
After recent fall, the stock is showing a sign of revival. Range shift in RSI is suggesting downside is over.
MACD is giving a 'buy' signal on the daily chart, the stock has closed above its 20-DMA making it poised for a short-term buying.
Aegis Logistics: Buy | CMP: Rs 225.35 | Target: Rs 255 | Stop Loss: Rs 205 | Return: 13 percent | Short term
The stock is breaking out from a declining trend line. Momentum indicators suggest the up move to continue in days to come.
Bullish Hammer has emerged on the weekly chart followed by bullish candle making it a 'buy' for short-term gains.
The author is Senior Research Analyst Rudra Shares & Stock Brokers.
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