Research Desk Stock Broking

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1 Research Desk Stock Broking India ValueMax January 01, 2015 ValueMax Monthly Investment Ideas ValueMax helps clients to take a long stance on stocks from the S&P BSE-100 universe. Comprising monthly technical investment ideas, ValueMax will have up to 10 stock recommendations, which will be issued at the beginning of every month. The selection and recommendation criteria will be based on technical analysis. ValueMax will be made available to the dealers and relationship managers through GotX and Karvy Mail. A brief technical report on the ideas will also be released, justifying our view on the stocks and the reason for the selection. The report will also be uploaded on IRIS & Karvy online websites. Book profit/exit messages will be communicated during the LIVE market on GotX (trading terminal) under the head ValueMax. Please find the ValueMax investment ideas for January Adani Enterprises Diversified Buy Bank Of India Banking Buy Bharat Forge Auto Ancillary Buy Coal India Mining Buy Dabur FMCG Buy Divis Laboratories Pharma Buy LIC Housing Fin Financial Services 436 Buy NTPC Power Buy State Bank Of India Banking Buy Tech Mahindra Software Buy CMP: Current Market Price; SL: Stop Loss; TGT: Target Note: All charts are sourced from Spider Software. 1

2 Adani Enterprises Diversified Buy day EMA day EMA day EMA Adani Enterprises ended the previous month with a gain of close to 6% despite the broader market remained weak. The stock has seen stellar rally 125 to 585 levels during the period of October 2013 to May 2014 with highest ever monthly volumes in the last 10 years during the month of April and May. Thereafter, the stock has witnessed profit taking and slipped to 420 levels, where the stock has taken multiple supports and bounced back. In the recent correction the stock has fell towards its 200 Day EMA where it took support and bounced back sharply to see price crossover of 100 Day and 50 Day EMA as well. This suggests the medium term correction of the stock is done with and has resumed it up trend. On the daily chart stock has given a break-out of the trend line drawn from 52-week high of 585 levels on back of strong volumes. On the weekly chart, the stock has given break-out of the 6 months triangular pattern at 480 for which the implied targets comes at levels likely to be achieved in the next 3-4 months. Among the indicators, parabolic SAR (Stop & Reverse) is trading below the price, suggesting buying will remain intact with the counter in near term while, RSI (14) heading towards the over-bought territory indicating the strength in the uptrend in the stock. Our take: Adani Enterprises would also be beneficiary of the coal mine allocation. The recent price action suggests the momentum in the stock to continue in the coming month as well. Thus, we recommend buying the stock for targets of 520 and 540 levels with a stop loss placed below 450 levels. 2

3 Bank Of India Banking Buy day EMA day EMA day EMA Bank of India has given a breakout of downward slopping trend line drawn from the high of 357 levels and closed well above the same. The stock outperformed the Bank Nifty and its peers significantly in the month of December and generated over 4.5% return when compared to 1.12% return generated by Bank Nifty. The stock has seen profit taking from the 52 week high of 357 levels which dragged the stock to the low of 268 levels. Thereafter, the stock has traded in the consolidation range of levels for approximately two months. The stock has given a breakdown of said consolidation range in September last year which dragged the stock to the low of 224 levels. However, the stock has give V shaped recovery to enter into the consolidation phase. The current price action in the stock has given a breakout of two month consolidation range of levels and the stock closed well above the said consolidation range in the last month. The recent breakout in the stock is a fresh trigger for the stock and any trading dip can be used for accumulation of stock in near term. Among the technical indicators, the 14-day RSI line is pointing northwards and MACD line has seen a crossover with signal line and trading above the zero line during the whole phase of the two months consolidation, indicating the strength in the stock. Our take: The recent breakout and the expected rate cut by RBI during the calendar year 2015 by 50 basis enhance the confidence in PSU Banks. The stock is likely to outperform even during the current month. One can accumulate the stock for upside targets of 330 and 350 levels with a stop loss placed below 275 levels. 3

4 Bharat Forge Auto Ancillary Buy day EMA day EMA day EMA Bharat Forge has been in a structural uptrend making higher highs and higher lows on monthly charts. From the low of Rs.183 levels to the highs of Rs levels, the stock has been an outperformer in the Auto Ancillary space continuously breaching its all time highs on the regular basis. The stock made a fresh life time high of Rs levels in December-2014 and witnessed a round of profit booking which dragged the stock towards the lower levels of Rs , where the counter took support which coincide with its 50 day EMA. The above said support also coincides with the 61.80% (Golden ratio) Fibonacci retracement level plotted from the low of Rs to a high of Rs.1015 on weekly charts, which confirms that the stock had formed a base and is all set to start its next up move towards the uncharted territory on the higher side. The stock is also trading above all of its major short and long term moving averages with technical indicator 14 day RSI showing reading in the comfortable zone, clearly indicating the bullish trend is likely to remain intact in the counter. The stock is also trading above its previous top of Rs levels clearly suggesting that the stock is witnessing good accumulation on any correction towards the lower levels. The parabolic SAR (Stop & Reverse) is also below the trading price, clearly suggesting that the northward momentum is likely to continue in the stock in the coming trading weeks. On the sectoral front, we expect the Auto Ancillary stocks like Bharat Forge to perform well amid encouraging Auto sales numbers from past few months. On the other hand, improving economic scenario will also boost the positive sentiment in to the counter. Our take:. Taking the above the data facts in to the consideration, we recommend short term traders to enter the stock at the current levels for the potential targets of Rs.1015-Rs.1045 levels. Any dip towards the Rs.900 levels can be utilized to average the stock, with a strict stop loss placed below Rs.878 levels. 4

5 Coal India Mining Buy day EMA day EMA day EMA Coal India had tremendously outperformed CNX Metal last month and generated 7.89% return, whereas CNX Metal has generated -6.31% returns during December The stock had been given breakout from 362 levels and making higher highs and higher lows on daily chart. After making life time of 423 levels in the month June, the stock went into brief correction during the last few months. The stock has honored the long term moving average 200 Day EMA and formed a strong base around the same levels before making the fresh move. In the recent price rally the stock is taking support at 21 Day EMA and bouncing back. We expect any dip towards it short term moving average with be better levels into the stock On the weekly chart the stock is forming rounding bottom pattern since it made its life time high levels. We expect the stock to retest its life time high in the current rally and any break-out of the same could push the stock much higher levels in the short to medium term perspective. Among indicator, the RSI (14) is trading at and its signal line is pegged at showing the strength in the counter for upside. On daily chart, Bollinger Band (20,2) is also widening and showing buying interest of participants towards the mean price levels. This suggest the volatility to increase in the stock and likely to expand through it upper band. Our take: Traders can buy this stock at current level or at any declines in the stock towards 372 can be used as accumulation with a strict stop loss placed at 361 levels on closing basis for targets of 418 and 425 during the current month. 5

6 Dabur FMCG Buy day EMA day EMA day EMA Dabur India witnessed sharp profit taking after testing life time high of 249 levels during the last November. The stock plunged to the low of 218 levels during the mid of December and witnessed sharp bounce from the same to end the previous month with a loss of close to 3%. The fall in the stock was with minor volumes and the pull-backs in the stock was seen with increasing volumes indicating the stock is in the grip of bulls and resumed it uptrend to make news highs after a brief correction during the previous month. In the recent correction the stock has fell towards its 100 Day EMA where it took support and bounced back. In the last few sessions the stock price managed to cross over above it short term moving averages and ended the month above the same suggesting reversal of the trend in the stock. Among the momentum indicators, ADX on weekly chart is above 40 which indicating uptrend in the stock is intact despite the recent correction. Among other indicators, parabolic SAR (Stop & Reverse) is trading below the price, suggesting buying will remain intact with the counter in near term while, RSI (14) is trading at and its signal line is pegged at showing the strength in the counter for upside. Our take: The stock is strong uptrend both in the medium and long term perspective. In the short term the stocks has taken support and resumed its uptrend. We expect the momentum in the stock can push the stock to uncharted territory. We recommend buying the stocks for targets of 245 and 260 with a stop loss placed below 221 levels. 6

7 Divis Laboratories Pharma Buy day EMA day EMA day EMA Divis Lab out-performed the BSE health care Index and Bench Mark Indices during the last month. The stock ended marginally negative while BSE Health Care lost over 2% during the previous month. The stock is strong bull trend making classical higher highs and higher lows pattern from 400 to current all high levels of Recently, the stock witnessed a correction to 1636 levels and is strongly supported by 100 EMA which was seen as an idiosyncratic feature for the stock resuming its uptrend after being supported by 100 EMA. Also, the stock has closed above the cluster of short term moving averages suggesting the reversal of the near trend in the stock. The stock has formed the strong base around 1700 levels after the correction from its life time high levels. The stock has seen volumes up tick during the increase in the prices suggesting strong hands accumulated the stock on any minor declines. Among the indicators, parabolic SAR (Stop & Reverse) has given fresh buying during last trading day of the previous month. While, the RSI is trading at one month high amid MACD line just crossing the Zero line indicating the stock is ready to see the momentum towards it life time high during the current month. Our take: The above fact suggests the correction in the stock is over and is ready to resume its uptrend to march to towards the uncharted territory. We recommend buying into the stock for targets of 1825 and 1880 levels with a stop loss placed below 1610 levels. 7

8 LIC Housing Finance Financial Services 436 Buy day EMA day EMA day EMA LICHSGFIN has seen a strong rally from 155 levels and continued its bull trend to reach an all time high of 464 levels during the previous month. The stock has shown secular up move with higher highs and higher lows throughout the trend. The stock out-performed the broader market during the previous month by gaining close 3% while the benchmark indices ended negatively. The stock has seen huge sell-off from its life time high tested during the first week of the December. The stock plunged from 460 t0 370 levels in just 6 trading session. However, the stock honored its 50 Day EMA levels and bounced back from the same. Also, recently the stock has seen crossover of it short term 13 and 21 Day EMA indicating the correction in the stock is over and the momentum is set to making fresh highs in the coming week. The volumes in the stock has increase significantly in the last two sessions of fall indicating smart investors have bought into the correction. Also, delivery volumes increase in the recent price rally suggesting momentum to continue in the stock in near term. The momentum and volume indicators CCI(60) and MFI(30) plotting in the bullish zone indicates the bullish trend to remain intact in the counter. On the weekly chart the ADX reading above 34 suggest the medium term trend in the stock is intact The stock will also be beneficiary of affordable housing reforms announced by the government, amid expectation of declining interest rates will boost the sentiment in the stock. Our take: Considering all the above data facts, we recommend short to medium term investors to enter the stock at the current levels for targets of levels. And any correction towards the 410 levels can be utilized to average the stock keeping strict stop loss placed below 400 levels. 8

9 NTPC Power Buy day EMA day EMA day EMA NTPC has given a break-out of the bullish head and shoulder pattern in daily chart at around 143 levels which gives implied targets of Rs. 160 levels in the next 2-3 weeks. The stock has seen stellar rally during the month of May-June period post election from low of to 169 levels expecting new government likely to announce the reforms with respect to power sector. However, the rally in the stock fizzed out and gradually the stock slipped to 126 levels in the last 6 months. The stock seen good buying around the lows below 130 levels as volumes improved considerably. Also, the government announcing the coal reforms has boosted the sentiment in the power stocks. The recent pullback in the stock suggest that the 6 months in the correction in the stock is over is expected to head towards it 52-weeks high in the coming weeks. Currently stock price moved well above its 21/50/100/200 day EMAs in daily chart which indicates that bulls are taking control of this counter. Parabolic SAR in daily charts is quoting at well below the current market price which is another sign of continuation of positive momentum in the stock. On weekly charts a divergence in RSI with 14 day line moving above 9 day EMA with RSI at is observed. This indicates there is enough room is left for up move. On weekly charts the stock has crossed the middle line in Bollinger bands and is moving towards the upper band indicating a positive momentum in the stock. Our take: The stock has outperformed Nifty in the month of December and closed 0.91% up on monthly basis while Nifty lost about 3.56%. It indicates that money is flowing in to this counter and it may see a decent rally in coming weeks. Therefore we recommend buying stock at current levels and if any dip towards 139 levels should be utilized to average the stock, for an initial target of 152 levels and 160 levels, keeping stop loss below 136 levels. 9

10 State Bank Of India Banking Buy day EMA day EMA day EMA SBIN has outperformed NIFTY marginally last month. SBIN ended the previous month with a minor loss of 2.97% while NIFTY plunged 3.56% in the month of December. We expect the outperformance in the stock to continue this month as well. The stock has seen sharp move from 145 in the month of February 2014 to make new 52-week high of 327 levels last month. Thereafter the stock saw a sharp profit taking which dragged the stock to low of 287 levels, where it has formed capitulation kind of bottom on 17th December and bounced back sharply. The corrective move in the stock is with low volumes against the increasing volumes with up move in the price The recent move in the stock suggest the correction in the stock is done with and resumed it up trend towards its life time high levels 341 levels. On weekly line chart the stock has formed a bullish flag formation and gave its breakout at 270 with good volumes on 31 October 2014 indicating its strong uptrend. Extending the targets of the said pattern, it has an unachieved target of 370 and we expect the target likely to be achieved in the coming weeks The ADX on weekly charts is trading substantially above the 25 mark at around 30 levels on weekly charts indicating the current strength of the trend is getting strong Parabolic Stop and Reverse is trading below the price, suggesting buying will remain intact in the stock. Stochastic has cooled off from the overbought zone and %K and %D crossover is indicating the trend to continue. MACD (12/26/9) is trading is in positive territory and has a Bullish Crossover above the trigger line, indicating momentum likely to continue in the counter. Our take: The stock is expected to continue its bullish trend and move towards 340 and higher levels in the coming weeks. We recommend any minor decline in the stock would be good levels to enter into the stock keeping a stop loss below 285 levels. 10

11 Tech Mahindra Software Services Buy day EMA day EMA day EMA In last one month TECHM managed to outperform NIFTY and CNX IT Index. We expect this outperformance will persist in the coming weeks as well. The stock is consistently making higher high and higher lows on weekly charts for the last 18 months indicating strong uptrend. The stock has rallied from the levels of Rs 800 to the life time highs of Rs 2734 during the above said period. TECHM is trading sideways for the last few weeks in the range of Rs 2461 and Rs 2629 levels after a strong break away gap from Rs levels after posting a strong performance in Q2FY15 in the month of October. The stock post making a life time high of 2734 in mid November 2014 entered into a time correction mode, where price correction was limited, as strong hands were accumulating the stock on any minor dips. In corrective phase, stock prices respected its 100-DWMA, which has provided a strong support to prices and helped to build a strong base above 2450 levels. In last six months on weekly chart the stock is consistently trading above the mean of the Bollinger Band, suggesting minor dips towards the said mean should be utilized as buying opportunity. The ADX on weekly charts is trading substantially above the 25 mark at around 28 levels on weekly charts indicating the current strength of the trend is getting strong and the Parabolic Stop and Reverse is trading below the price, suggesting buying will remain intact in the stock. Our take: The stock is expected to resume its bullish trend and move towards its life time high of 2734 and higher in the coming weeks. Thus we recommend buying into the stock at current levels and add further on declines towards 2500 levels with a stop loss placed below 2450 levels. 11

12 KARVY RESEARCH DESK STOCK BROKING JK Jain Karvy Stock Broking Limited Karvy Centre, Avenue-4, 2nd Floor, Road No: 10, Banjara Hills, Hyderabad India. Tel: ; Fax: Disclaimer This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Karvy Stock Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. The information given in this document on tax if any are for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force this could change the applicability and incidence of tax on investments. Karvy Stock Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Karvy Stock Broking Limited has not independently verified all the information contained within this document. Accordingly, Karvy Stock Broking Ltd cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Karvy Stock Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Karvy Stock Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Karvy Stock Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. 12