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Last Updated : Sep 01, 2018 03:45 PM IST | Source: Moneycontrol.com

Rupee & crude prices to be on market’s radar; 3 stocks to bet on

After a six-week run-up, we are expecting that Nifty will consolidate at this level and quality mid-caps and small-caps will rally. They have been lagging behind with respect to the big names

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Sumit Bilgaiyan

Equity99

The Nifty made a new life-time high in the last week of August and it has been making higher tops and higher bottoms formations. Every small decline is being bought in the market as supports are gradually shifting higher.

On a weekly basis, the week gone by is the sixth straight week where Nifty closed with a green sign. The 50-share index had shown 140 points rally on first day of the week and remained rangebound in rest 4 days.

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Our economy grew at 8.2 percent in the April-June quarter of 2018-19 versus poll of 7.6 percent. Manufacturing and farm sectors have reported strong growth in this quarter.

After a six-week run-up, we are expecting that Nifty will consolidate at this level and quality mid-caps and small-caps will rally. They have been lagging behind with respect to the big names.

Looking at GDP numbers, one thing is quite clear that India is on high growth trajectory but market will also keep watching rupee and crude price, which is India’s one of the most determinants factor of India’s fiscal policy.

There are key events happening in this week, investors and traders must pay attention to it. On September 3, MSCI index revisions gets effective.

The Bombay High Court will next hear the case. On September 4, 2018, Muthoot Finance will declare its quarterly results. On September 5, HUDCO, SREI INFRA will declare quarterly results too.

Our past recommendations like Ajanta Pharma, L&T Technology Services, Suven Life, Sun Pharma, ITC, GMR Infra, M&M, Adani Green etc have given fantastic returns in very short term.

Reliance Capital

After completing Rs 18,800 crore deal with Adani Transmission, ADAG Group remained in limelight in last week. Reliance Capital is highly undervalued stock against its peers. Its listed subsidiary Reliance Nippon Life is having a market capitalisation of Rs 14,461 crore and Reliance Home Finance is having a market capitalisation of Rs 3,152 crore while Reliance Capital is having a market capitalisation of just Rs 11,873 crore.

Its share book value works out to Rs 727.98 and the price to book value ratio stands at just 0.65x which is lowest against all peers. It has declared 110% dividend for FY18. At the CMP this results in a dividend yield of 2.34% which is highest against peers.

Stock is trading at P/E ratio of just 8.9 which is again lowest against peers. All in all this stock is highly undervalued against its peers and we are expecting huge rerating in coming days and we are recommending a BUY on REL CAPITAL for short to medium term.

Dr Reddy’s Labs

Dr Reddys lab has reported better than expected performance in 1QFY19, led by healthy growth in domestic business. Its sales and EBITDA grew by 12.2% YoY and 140.2% YoY, respectively, while PAT increased by 671.7% to 456.1 crore. EBITDA margins in Q1FY19 were at 21.7% vs. 16.3% in Q4FY18 and 10.1% in Q1FY18.

Recently, the company received establishment inspection report from US FDA for its API Srikakulam Plant (SEZ), Andhra Pradesh facility which is positive for it. Stock has given negative return in last 3 years and remained range bound in last one year.

Technically, stock is ready for big break out. Its daily and weekly charts look highly promising. We are recommending a Buy for medium term.

Parag Milk Foods

The company has posted a quite healthy growth in Q1FY19. Its profit zoomed 168% to Rs.28.3 crore against Rs.10.5 crore. EBITA increased 109% to Rs.59.7 crore against Rs.28.5 crore while sales increased by 33% to Rs.549.4 crore against Rs.412.9 crore. Its EBITDA margin improves to 10.9% from 6.9%. The firm recently launched Avvatar Advance Muscle Gainer.

The product specially designed to support lean muscle gain with controlled fat levels. It has also launched mishti doi under the Gowardhan brand. The firm has acquired newly plant at Sonipat which will help company to enter in North India’s market.

Stock is trading at a PE ratio of 24.7x which is lower against peers. We are recommending a Buy for medium term.

Disclaimer: The author is Founder, Equity99. 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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First Published on Sep 1, 2018 03:45 pm
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