Manali Bhatia of Rudra Shares & Stock Brokers said overall technical setup and options data suggests Nifty is likely to swing in 10,960-10,650 range before any fresh directional move
Rudra Shares & Stock Brokers
Along with lower-than-estimated Q2 GDP numbers, muted passenger vehicle sales in November, uncertainties surrounding state election results, another crucial event is lining up -- the voting on December 11 in the UK Parliament on the proposed Brexit agreement.
The UK and EU have agreed on a Brexit deal -- a 585-page withdrawal agreement that sets the terms of divorce between the UK and the European Union.
The opposition in the country is against the deal in its present form. Therefore, if it fails to pass, the UK may enter into 'no deal' or 'bad deal' as it is scheduled to leave EU March 29, 2019, which could be a major disruption for markets across the world. Hence, the road ahead for bulls appears uncertain.
Though healthy foreign inflow and weakening crude oil prices kept the Nifty in high spirits last week, 10,958 (100-DMA) is crucial going ahead. Bulls could take the rally forward till 11,040-11,088 if the 100-DMA is broken decisively. On the downside, 10,650 acts as a support for the week.
Overall technical setup and options data suggest Nifty is likely to swing in 10,650-10,960 range before any fresh directional move.
Next few days are likely to favour the contra trend traders as we could see a sell-off at higher levels and demand on lower levels.
Here is a list of 4 technical and fundamental picks that could return 8-39 percent:
Dark horse recommendations:
A twofold hike in customs duty on footwear, a cut in GST rate from 18 percent to 5 percent for products priced under Rs 1,000, and a package of Rs 2,600 crore for the leather and footwear industry, will accelerate revenue and volume growth for this sector. Get your shoe shined with these two dark horse bets.
Khadim India: Buy | CMP: Rs 593 | Target: Rs 785 | Return: 32% | Long term
Khadim has a strong presence in east India and is an emerging brand in west and north India. The company is working on value engineering of the products through the asset-light business model.
As guided by the management, over the next few years, topline will grow at around 15 percent, profit will grow healthy at 30-32 percent, which is overwhelming. EBITDA will benefit from economies of scale and margin will improve by 50 bps.
Khadim's two distinctive business models reduce dependence on any one business. The retail business that contributes around 62 percent in the overall revenue will grow at 13-14 percent. Distribution business that contributes 22 percent of revenues can grow at 26-27 percent, above the industry estimates of 22-23 percent.
For Q2FY19, net revenues increased by 30.7 percent from Rs 173.2 crore to Rs 226.4 crore YoY. EBITDA stood at Rs 18.7 crore, lower compared to previous year due to higher employee cost and other expenses.
Finance cost reduced compared to previous year but surged sequentially as short term borrowing increased due to the festive season. We value Khadim at estimated P/E of 27x for FY19 for the target price of Rs 785 initially.
Liberty Shoes: Buy | CMP: Rs 165 | Target: Rs 230 | Return: 39% | Long term
To tap the high potential tier 1 and tier 2 cities and towns in India, Liberty is entering into these towns. It is targeting an annual revenue of Rs 1,000 crore by 2020. Leap 7x the latest collection issued under the athleisure footwear segment. This is gaining traction through the motivational campaign #ChalBadhChal.
Moreover, it has broadened horizon with the launch of its new lifestyle segment - its first range of perfumes, expected fully networked by FY20. The new line fragrances are available at a price that best suit your pocket.
During the Q2FY19, Liberty domestic sales grew 31 percent from Rs 119.61 crore to Rs 156.82 crore. Splendid performance by FOCO model has helped ease the working capital cycle. Export sales registered growth of 59 percent. PAT improved to Rs 2 crore from Rs 1.14 crore.
Advertising & business promotion, rental of new stores, commission for sales etc. have increased as against last year leading to a modest decline in EBITDA at 6.51 percent, though a worth drop eventually. We suggest buy with the target of Rs 230 initially.
Tata Motors: Sell | CMP: Rs 172.45 | Target: Rs 158 | Stop loss: Above Rs 178 | Return: 8% | Short term
Stock is in long-term downtrend and making lower top and lower bottom formation and trading below 200-month moving average.
Momentum indicators suggest downside movement is likely to continue. Recent pullback could not sustain and formed a bearish flag formation. Hence, it can be shorted for short-term gain.
Bharat Electronics: Sell | CMP: Rs 83 | Target: Rs 75 | Stop loss: Rs 89 | Return: 9.5% | Short term
Stock has been in a continuous downtrend for almost a year and forming lower top and lower bottom formation. Recent pullback rally fizzled at declining trend line resistance. It has formed a small distribution pattern after a pullback and finally breaking down.
Prices have started tagging below the lower Bollinger band. Weekly RSI has formed a reversal pattern and prices have taken resistance of 20-day moving average. Hence, further downside is expected in the stock and can sold for short term gain.
Disclaimer: Rudra or its research analysts, or his/her relative or associate do not have any direct or indirect financial interest nor any other material conflict of interest at time of stock recommendation, in the subject company. However, Rudra or its research analysts, or his/her relative or associate may have positions In Futures & Options.Disclaimer: The author is Senior Research Analyst at Rudra Shares & Stock Brokers. 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.
Subscribe to Moneycontrol Pro's Annual plan for Rs 399/- for the first year. Use coupon PRO2020 (Available on Web & Android only).