Manali Bhatia Rudra Shares & Stock Brokers
Benchmark indices extended the loss last week as Nifty closed below 10,100 with the loss of 273.55 points. Stable rupee and respite in crude oil prices didn't help the Indian market and deep cuts have been seen across all sectoral indices.
Maruti and Yes Bank disappointed the street with weak results and further deteriorated the bulls sentiment. Yes Bank, Grasim, Sun Pharma, IndusInd Bank were major laggards and shed 8 percent to 17 percent.
The market is likely to trade with negative bias in the coming week and the previous bottom of 9,951 will act as major support. If this is broken, further downside towards 9,835 and 9,626 is possible.
On the contrary, any pullback is likely to be sold. 10,245 and 10,350 are major resistance for the week which is 38.2 percent and 61.8 percent retracement level of previous week range. Nifty has violated the rising channel support for the first time since 2016 suggesting selling pressure on higher levels is likely.
Derivatives data suggests a support at 10,000-9,950 levels as 10,000 put option holds the highest cumulative open interest of 34 lakh contracts. Unwinding in 10,200 put option and call writing in 10,200 and 10,300 strike price with reasonable volume shows a lack of confidence of bulls at higher levels.
High volatility and sharp moves are expected this week as in the past years also, last week of October witnessed major falls and turn around, including in the year 2008.
There are a series of events to be watched out for this week: PCE Price Index data for the US, Nikkei manufacturing PMI for India, domestic auto sales number and infrastructure output for India.
Here is a list of 4 stocks which could give double-digit returns:
International Paper APPM: Buy | CMP: Rs 452 | Target: Rs 525 | Return: 16 percent | Medium term
By investing in the fibre-based market coupled with controlling costs, managing capital spending and focusing on deliberate improvement efforts to increase productivity and efficiency, the company has generated a strong set of numbers and free cash flow during the second quarter.
Revenue for the quarter surged 15 percent to Rs 336 crore as against Rs 285 crore last year. EBITDA margin expanded to 22.89 percent in Q2 as against 11 percent YoY. EPS shot to Rs 9.41. Borrowings have been reduced to half.
With increasing demand from various customer segments like education, business and corporate, and commercial printing, the paper Industry is set to grow in future. We recommend a 'buy' for the medium term target of Rs 525.
Vinati Organics: Buy | CMP: Rs 1,314 | Target: Rs 1,500 | Return: 14 percent | Medium term
Vinati is a global leader manufacturer of value-added products catering to industrial and consumer companies with a dominant global share of 65 percent in ATBS. Its second quarter numbers beat our estimates. Revenue was at Rs 252.8 crore, up by 36 percent YoY with EBITDA margin expanded to 42 percent during the quarter. Net profit rose to Rs 65 crore, up 124 percent, thereby EPS grew more than double to Rs 12.66.
Growth from existing and new products like Butyl Phenol and Para Amino Phenol (PAP) will flow through in FY20 -FY21. Owing to strong demand in the ATBS segment with the exit of its competitor and considering new capacity expansion plans that have been lined up in the ATBS segment as well as in the other segments, the company is expected to deliver good set of numbers ahead, as it did in Q2FY19. Expecting EPS during FY19 at Rs 50 and P/E at 30x, we suggest buying with a target of Rs 1,500.
United Spirits: Sell | CMP: Rs 520.1 | Target: Rs 465 | Stop loss: Rs 551 | Return: 11 percent | Short term
Stock is forming a lower top and lower bottom formation from last few weeks and recent pullback seems to be over as bearish candlestick pattern has formed on the daily chart.
Weekly ADX is sloping upwards and treading above 20 suggesting momentum is likely to continue on the downside.
Weekly RSI is also making a reversal pattern after a mild pullback. The stock is trading below long-term moving averages on the weekly chart. Thus, momentum is likely to regain on the downside.
Century Textiles: Buy | CMP: Rs 771.2 | Target: Rs 860 | Stop loss: Rs 735 | Return: 12 percent | Short term
The stock has formed a bullish Doji pattern on weekly chart on long term support line. RSI is forming a positive divergence and making a range shift towards bulls.
Monthly RSI is treading at important support zone of 40 suggesting downside in the stock is likely to be arrested in short term. Available at the lucrative levels making it a decent buy for short-term gain.
The author is Senior Research Analyst at Rudra Shares & Stock Brokers.
Disclosure: Rudra or its research analysts, or his/her relative or associate do not have any direct or indirect financial interest (except Vinati Organics Ltd.) nor any other material conflict of interest at the time of stock recommendation, in the subject company. Also, Rudra or its research analysts, or his/her relative or associates do not have actual/beneficial ownership of one percent or more securities of the subject company. However, Rudra or its research analysts, or his/her relative or associate may have positions In Futures & Options.
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