Manali BhatiaRudra Shares and Stock Brokers
The Indian market witnessed massive pullback on October 12 in spite of weakness in the US market. Amidst a heavy volatility, Nifty managed to close with 1.5 percent gain in the week at 10,472.5.
Long unwinding in 10,400 call option of nearly 5.4 lakh contracts added fuel to the fire and strong short covering witnessed on the last day of the week and helped the Nifty to finally end the week lower by 333.9 points.
The short-covering rally could extend in this week as Nifty took support of rising trend line and formed a bullish candle on daily chart suggesting bulls could take it to 10,557 and even 10,610 which is 38.2 percent projection of previous week range.
Apart from this, derivatives data shows Put writing in 10,400 and 10,300 strike price with decent volumes which indicates support at a lower level. Whereas writing has been seen in 10,700 Call options suggesting limited upside. Bearish Engulfing pattern on the monthly chart with negative divergence suggests selling pressure could be seen on higher levels.
This move should be taken as relief rally and selling pressure at higher levels is likely. 10,610 and 10,750 will act as an important resistance while 10,297 and 10,130 as major support for the week.
Further damage till 9,950 is expected if support level breaks on the lower side. VIX trading at 18.62 indicates volatility could be lower as compared to last few sessions but still is a matter of concern.
The CPI data reported decent numbers at 3.77 percent in September followed by the same story in August at 3.69 percent, both within RBI's target of 4 percent.
Implying RBI will either restrain itself from raising the interest rates or keep it at the same level in the next meeting. This could be a positive indicator for the market and banks, and NBFCs are expected to benefit out of the same.
IIP growth stood at 4.3 percent from 4.8 percent a year ago, which is quite normal. Though all the other sectors performed very well, the decline in mining & capital goods sector has led to this offtake. Therefore, stay away from the mining sector this week.
The upcoming forex reserve data and performance of Brent crude in next week may provide clarity on whether rupee will stabilise. Further, a substantial decrease in crude prices and rupee appreciation in the week gone by may force a major pullback in the market.
However, the key events to watch out for, which may shape up the market are — WPI inflation data, PPI data of China, industrial production data of the US, RBI Forex Data. Apart from these, quarterly earnings of various companies should be watched — Hero MotoCorp, Havells, Mindtree, IndusInd Bank, etc.
Here is a list of 5 stocks which could give 10-60 percent returns
Ipca Labs: Buy | CMP: Rs 658 | Target: Rs 860 | Return: 30 percent | Medium-long term
Anti-malaria business is expected to resume from Q2 onwards with revenue pegged at Rs 180-200 crore in FY19. Domestic formulation to remain on track to achieve 13-14 percent growth in FY19 supported by a low base of FY18.
Incremental sales from new molecules and higher traction in existing molecules will further benefit the company. It is also riding on the back of a gradual revival in revenue growth and a strong improvement in the margin led by pick-up in the tender and US businesses.
Guided for more than 200 bps improvement in margins for FY19, we initiate a Buy with a target of Rs 860.
Kennametal India: Buy | CMP: Rs 854 | Target: Rs 1,190 | Return: 40 percent | Medium-long term
The company is virtually debt-free having strong operating cash flow and EBITDA margins which it also posted in FY18 results. KIL has plans to diversify and has increased focus in aerospace, defence and railways segments.
Considering company's strong balance sheet, significant growth and profitability in future as well, we recommend Buy with a target of Rs 1,190.
SML Isuzu: Buy | CMP: Rs 643 | Target: Rs 1,035 | Return: 60% | Medium-long term
On the back of strong Q1 numbers, new lunches for SML in the near future and excellent execution of its capex plans would drive growth. Moreover, SML has sorted out its previous inventory issues which had lead to de-growth in the previous year.
The company is already on track with regard to notifying BS-VI emission norms, to be effective from April 2020. SML expects to increase its market share from about 12 percent to 17-20 percent in its focus segment (5-12 tonne) going forward.
Estimating P/E of FY20E at around 35x, the estimated share price (discounted @ 10 percent for 1 year) turns out to be Rs 1,035.
L&T Finance Holdings: Buy | CMP: Rs 132.8 | Stoploss: Rs 118 | Target: Rs 149 | Return: 12 percent
Stock is trading at 61.8 percent retracement of major swing movement from February 2016 to October 2017. Doji candlestick pattern has emerged on the daily chart with a positive signal on momentum indicator.
The weekly chart has taken support at 200 DMA along with bullish engulfing candlestick pattern. Thus, can be bought for short-term gain.
Raymond: Buy | CMP: Rs 662.9 | Stoploss: Rs 590 | Target: Rs 750 | Return: 13 percent
The stock has corrected 50 percent from recent highs and taken support at 200 DMA on the weekly chart.
Bullish doji as well as hammer candlestick pattern are giving a signal of reversal and a low-risk entry for short-term gain.
Disclaimer: The author is Senior Research Analyst at Rudra Shares and Stock Brokers: The views and investment tips expressed by investment expert on moneycontrol.com are his/her 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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