ICICIdirect.com's report on Asian Paints
The fall in crude prices of over 60% since the start of 2014 has been one of the most beneficial themes for the Indian economy. Not only has it improved the country’s current account deficit (CAD) but also helped to cool off inflation. This has been one of the key drivers of the strong Nifty price performance as well. The impact is even more significant for companies that have oil as one of the key inputs for production. Asian Paints is one such stock, which is a direct beneficiary of a fall in crude prices, as it uses Titanium Dioxide, the price of which corrected over 11% in 2014
The stock posted soft Q3 quarterly numbers on January 29, post which it corrected over 15% from the highs of Rs 922. However, with crude prices likely to remain weak and the likely impetus on smart cities and infra projects in the Union Budget, the stock is likely to see a pick-up in business
The break out level was Rs 800 in the last up move for the stock. In the current decline, post results, the stock saw a pick-up in delivery volume near Rs 800, post which the stock held around these levels and started to move up
In open interest terms, the stock has seen a creation of short positions of over 25% post the quarterly results on January 29. However, as the stock found support near Rs 780, these short positions started to see closure. However, a bulk of these short positions are still intact in the counter and could propel further upsides
As the Nifty is currently in consolidation mode, the focus is coming back to the consumption theme and the space is attracting money flows. The stock has a beta of 0.65 (in trailing one year), which suggests it could remain insulated from sharp declines in case the broader market declines
Hence, we recommend buy on the stock with a target of Rs 995 and stop loss of Rs 738, with 200 DMA being near Rs 740. Further, the three month average stock price is also near Rs 800, which remains an immediate support
Recommendation time horizon: Three months
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Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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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