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Last Updated : Apr 15, 2019 02:38 PM IST | Source: Moneycontrol.com

'Nifty is likely to swing between 11,540-11,760; opportunities in selective stocks'

If Nifty trades lower than 11,540 on closing basis decisively, then we can expect the cut to get deeper till 11,311. Until then, Nifty is likely to pendulum between 11,540 and 11,760, said Manali Bhatia of Rudra Shares

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Manali Bhatia

The prospects of BJP returning to power again led to FPIs pouring money in the Indian equity market that helped the indices to surge. However, this factor has been priced in by market players and fully discounted.

Slowdown Pain:

Recently, the IMF pared the world economic growth target to 3.3 percent from 3.5 percent previously projected in January 2019. This is down from 3.6  percent in 2018. This is a concerning development.

Growth projections for India by ADB and RBI for FY20 have also been reduced to 7.2 percent, IMF had followed the same suit, lowering India’s FY20 GDP growth forecast to 7.3 percent.

Crude oil prices are also rising again after a steep fall, resulting in continuous pressure on rupee and CAD. Also, IIP data has hit a 20-month low at 0.1 percent. These multiple things may put pressure in till election results.

Combined with this, the Q4 earnings of various companies would be on the radar, especially on the earning and margin side. The results of TCS and Infosys though have beaten our estimates but muted margins for the same has disappointed the street.

On April 12, the market recovered initial losses of the week as Nifty closed almost flat on a weekly basis with a negative bias at 11,643.45. For the last few sessions, Nifty is locked in a trading range. On the weekly chart, it has formed a small real body preceded by a doji.

Moving forward, the technical setup is suggesting that sideways move might continue in the upcoming truncated week. The index is consolidating near 20-Day Moving Average from the last five trading sessions. It is trading above the short term support level and the higher top and higher bottom formation is still intact.

If Nifty trades lower than 11,540 on closing basis decisively, then we can expect the cut to get deeper till 11,311. Until then, Nifty is likely to pendulum between 11,540 and 11,760, where individual stocks would continue giving opportunities on both sides.

Here are the top stock trading ideas that can give good returns in the near term:

Godrej Industries: Buy | CMP: Rs 527.60 | Target: Rs 597 | Return: 13 percent | Time frame: Medium term

Healthy promoter pedigree in creating shareholder wealth through long term sustainable consumer brands is expected to aid growth, going forward.

Company’s chemical division has a blend of domestic and international operations with value-added chemicals that have steady margins. Despite headwinds, the division recorded revenue growth of 3 percent in 9M FY 19.

In Nature Basket division, the company targets a thoughtful expansion that entails 3x growth by FY20. Moreover, agri business is poised to see potential growth prospects with 20-25 percent PAT CAGR over next couple of years.

We have valued GIL using SOTP valuation wherein we value the key holdings of GIL using its market capitalisation and 40 percent holding company discount and for rest of the businesses we value as per MCap/sales valuation technique. Our target price for the stock comes to Rs 597.

Godrej Consumer: Buy | CMP: Rs 670 | Target: Rs 777 | Return: 16 percent | Time frame: Medium term

The company reported comparable constant currency growth of 8 percent aided by 10 percent international business growth and 6 percent domestic growth. India business reported EBITDA margin expansion of 140 basis points YoY aided by cost-saving initiatives.

While, in international business, comparable growth was decent but margin was disappointing. It decreased by 300 bps YoY to 14.7 percent weighed by both crude oil and currency depreciation.

However, on account of better crude oil pricing, the company remains optimistic of margin improvement ahead.

The company has been able to look towards double-digit volume growth in FY20. On valuation front, we estimate share price at Rs 777 in medium term, which corresponds to 37x P/E.

The author is Senior Research Analyst at Rudra Shares & Stock Brokers.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his 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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First Published on Apr 15, 2019 02:38 pm
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