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Last Updated : Aug 31, 2017 09:32 AM IST | Source: Moneycontrol.com

Don’t miss it: Top 4 stocks which can give up to 19% return in 6 months

Even the sectoral heavyweight banking index has seen a healthy breather. All in all, sectoral standing also corroborates the overall robust price structure.

 
 
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Dharmesh Shah

ICICI Direct.com Research

The Nifty50 behaved precisely in line with our expectations and extended the range bound consolidation in last week’s trade. The market seems to be absorbing adverse news flows like geopolitical tensions on the Korean peninsula, Infosys boardroom tussle and FII outflows while defending its key value area of 9700 over the last three weeks.

It highlights the underlying strength and validates the presence of a strong demand at elevated levels. We believe that the strong base formation above 9,700 has laid the foundation for the next up move within the structural uptrend.

We reiterate our positive stance and advocate that the current consolidation should be used as an incremental opportunity to enter into quality stocks in a staggered manner to ride the next up move

Going forward, we do not expect the price wise correction to extend beyond the 9700 regions in the present scenario as it is the confluence of lower band of expanding channel comprising up move since April 2017 till date and previous breakout area.

The sustenance above 9,950 levels is likely to trigger short covering and lead index towards 10,050 levels in coming week

The key observation over last week is that broader markets represented by midcap and small cap indices have attracted demand after the initial slump towards their May 2017 lows.

The heavily beaten down pharma space has also seen some buying interest emerge after approaching lower band of long term falling channel. Meanwhile, leading sectors like metal and FMCG have remained resilient during the recent corrective phase.

Even the sectoral heavyweight banking index has seen a healthy breather. All in all, sectoral standing also corroborates the overall robust price structure.

Here is a list of top 4 stocks which can give up to 19% return in next 6 months:

Larsen & Toubro: BUY| Target Rs1360| Stop Loss Rs1026 | Upside 19%| Time Frame 6 month

The capital goods and engineering behemoth Larsen & Toubro has begun a steady uptrend after concluding a healthy corrective phase of two years between 2015 and 2016. The stock attracted strong demand at the value area around Rs900 at the start of CY17.

The ensuing up move has confirmed a major higher bottom in place around Rs900. The stock in the last four months is witnessing consolidation in the broad range of Rs1200-1100 thus forming base for the next up move

The sharp up move since the start of the C.Y 2017 has resulted in a faster retracement of the July-December 2016 fall (Rs1090 to Rs875) as the five-month decline was completely overhauled in less than four months.

Faster retracement of the major down move and formation of higher high and higher low on monthly/quarterly scale confirms a bullish structural turnaround indicating conclusion of the two-year corrective phase and resumption of the primary uptrend.

We expect the stock to head towards target of Rs1360 over the medium term as it is the confluence of upper band of major rising channel in place since February 2016 and 123.6% Fibonacci price extension of the February-July 2016 up move projected from the November 2016 higher bottom of Rs875 provides target of Rs1360 from a medium term horizon.

Ambuja Cement: BUY| Target Rs308| Stop Loss Rs262| Upside 10%| Time Frame 1 month

The share price of Ambuja Cement remains in strong up trend forming a higher peak and higher trough in all time frame.

The key observation on the price chart of Ambuja Cement is that the stock has recently registered a breakout above the falling trendline joining the yearly high of 2015 (Rs287) and 2016 (Rs281) currently placed around Rs275 levels signalling a continuation of the current uptrend and relative outperformance in the short term.

The recent lower trough of Rs263 which also coincides with the 50 days EMA currently placed around Rs264 levels is likely to act as major support for the stock in the short term.

The weekly MACD is in uptrend and is seen taking support at its nine period’s average highlighting strength and validates positive bias in the stock

We expect the stock to continue with its current uptrend and head towards Rs308 levels in the coming month being the price parity with the previous up move from Rs191 to Rs270 (270-191=79 points) added to the recent trough of Rs229 (229+ 79=308) project upside towards Rs308 in the short term.

Reliance Capital: BUY| Target Rs920| Stop Loss Rs690| Upside 19%| Time Frame 6 month

The NBFC space has been one of the most favoured sectors among investors over the past many years as it has consistently produced winners that have created good wealth for the market participants.

Within the NBFC space, the share price of Reliance Capital has remained a prominent laggard over the last many years as it had been under an elongated consolidation phase. The stock was one of the leaders of previous bull market rally leading up to the 2008 top.

The recent price action suggests a larger degree structural turnaround as the share price has finally emerged out of a major consolidation phase spanning over seven years since 2011 till date.

We believe this presents a good investment opportunity from a medium term perspective.

The price up move in the last month saw the stock post a resolute breakout past the upper band of its seven-year consolidation range above Rs690 levels.

It has sustained above the breakout level of Rs690 in the current month and has strengthened further thereby confirming the larger degree structural turnaround implying the end of the long term consolidation phase and the start of a fresh uptrend.

We expect the stock to enter into a sustainable uptrend from here on and head towards the target of Rs930 over the medium term as it is the 138.2% Fibonacci extension of the January to May 2017 up move (Rs407 to Rs692) measured from the June 2017 higher bottom of Rs523 projects upsides towards Rs930 levels.

This also coincides with the multiple monthly highs of 2009 placed around Rs930 regions making it the likely target for the current up move.

Relaxo Footwears: BUY| Target Rs575| Stop Loss Rs465| Upside 14%| Time Frame – 6 months

The share price of Relaxo Footwears has seen a strong rebound from the November 2016 low of Rs350, within the up move the stock has undergone periodic phases of consolidation that have provided fresh entry opportunities.

In the present scenario, we believe the stock has concluded a healthy consolidation phase over the last five months since April 2017 and has rebounded from the major support level thus provides fresh entry opportunity in the medium term

The stock is in long term uptrend and witnessed a stupendous multi fold rally during December 2013- July 2015 rallying from a low of Rs 85 to Rs 615 in just 20 months.

The stock entered into a secondary corrective phase thereafter to work off the excesses of the preceding rally. The price wise and time wise behaviour during the corrective phase highlights the overall positive price structure.

Price wise, the stock retraced its 2013-2015 up move precisely by 50% (| 350) as the lows of March and November 2016 around the same level indicating accumulation by stronger hands at major retracement support.

Time wise, the stock spent over 24 months under consolidation against the preceding rally of 20 months. Limited price wise correction and elongated time wise consolidation form the key ingredients of a healthy corrective phase within a structural uptrend

We believe the stock is well placed to continue its upward trend over the coming months, as the consolidation phase over the last five months has approached maturity thus signalling the resumption of its primary uptrend.

We expect the stock to resolve higher and test Rs575 levels in the medium term being the upper band of the rising channel in place since November 2016.

Disclaimer: The author is Head Technical, AVP at ICICI Direct.com Research. 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 Aug 31, 2017 09:32 am
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