Research Desk Stock Broking India ValueMax December 01, 2014 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 December 2014. Exide Industries Auto Ancillary 166.20 Buy 155 146 185 195 Federal Bank Banking 151.80 Buy 143 138 168 175 Glenmark Pharmaceuticals 820.25 Buy 789 754 910 948 Hindalco Metal 174 Buy 162 157 195 205 M&M Auto 1323.75 Buy 1280 1250 1400 1450 PFC Finance 309.50 Buy 295 285 345 355 Tata Chem Agri 437.20 Buy 419 400 480 495 Tata Global Beverages FMCG 161.30 Buy 152 146 178 185 Titan Consumer Durables 370.85 Buy 362 353 395 410 Wipro Software 585.80 Buy 561 548 620 645 CMP: Current Market Price; SL: Stop Loss; Tgt: Target Note: All charts are sourced from Spider Software. 1
Exide Industries Auto Ancillary 166.20 Buy 155 146 185 195 21 day EMA 160 160 174 50 day EMA 161 150 183 200 day EMA 146 147 190 Exide Industries is manufacturer of lead acid storage batteries, and likely to benefitted by revival in automotive segments & cost cutting efforts to improve margins. The recent fall in the crude price will benefit the Automobile sector and which will increase the direct demand for batteries in the coming quarters. The stock price witnessed sharp rally from the lows of 94 made in the end of Jan 14 to the high of 183.40 made in mid of Sept 14, gains of 94% in matter of 8-9 months. After posting a fresh life time high stock prices witnessed correction in last three months, wherein it retraced 38.2% of mentioned rally, which is a healthy price correction in bull market scenario, and should be bought in. Currently stock prices placed well above its long term moving average 200-DEMA which has provided support to prices even in recent correction; also it holds above its 21 & 50-DEMA currently placed near 160-161 levels. And also very recently prices gave decent breakout from its falling trend line resistance, suggests bulls are ready to take prices higher. On the long term price chart analysis, stock prices was moving within a range of 90 to 170 levels for more than three years, but in the recent rally prices managed to surpass ceiling and posted fresh high clearly indicates that after a brief correction prices is ready to venture into uncharted territories in the coming weeks. Also, momentum oscillators are well poised with bullish bias, supports underlying strength in prices. Our take: The stock prices witnessed spurt in momentum and provides an ideal opportunity to accumulate at current level, as structurally prices are poised to surge higher in coming weeks. Therefore we recommend buying stock at current levels and if any dip towards 155 levels should be utilized to average the stock, for an initial target of 185 levels and 195 levels, keeping stop loss below 146 levels. 2
Federal Bank Banking 151.80 Buy 143 138 168 175 21 day EMA 143.00 147.00 155 50 day EMA 137.00 140.00 160 200 day EMA 117.00 133.00 175 Federal Bank ended 6.86% during the last month, outperformed the broader index, Nifty which gained close to 3.2%. However, the stock under performed it peers in the month of November, the benchmark indices Bank Nifty closed the November month with a gain of 8.61%. We expect the stock bridge the underperformance in the current month and inch higher towards the above mentioned targets. Technically stock prices in secular bull trend and managed to consistently move higher and high. The rally started from the lows of 44 levels made in Sept 13 is still ongoing and prices continued to post fresh highs; the stock made life time high of 153 levels during the last trading session. The stock is taking support at its short term ( 13 and 21 DEMA) on corrections. Any pullback to those levels should be utilized as good opportunity to buy into the stock for short to medium term perspective. The 21 Day EMA is currently pegged around 143 levels. On the technical setup momentum oscillator 14-period RSI inching higher towards overbought territory, while stock prices managed to pierce upper Bollinger Band (20,2) reaffirming strength in momentum. Also, MACD (12/26/9) is holding in bullish territory and likely to find support above signal line. Our take: The stock prices marching in uncharted trajectories, exhibits inherent strength, inducing to accumulate stock at current levels for higher price targets. Therefore, we recommend to buy stock at CMP and average stock on dip towards 143 levels, for an upside target of 168 and 175 levels, with placing a tight stop loss at 138 levels. 3
Glenmark Pharmaceuticals 820.25 Buy 789 754 910 948 21 day EMA 783.53 800 850 50 day EMA 750.01 782 895 200 day EMA 654.27 754 950 Glenmark showed a strong trend starting its journey from Rs.531 levels in mid-july to early September this year increasing its stock value to a whopping 48% and formed a top of Rs.789 in a span of 2 months. Thereafter, the stock retraced to a low of 676 and corrected about 14.3% by the end of September and took support at the important 61.8 % Fibonacci retracement level drawn from Rs.531 to Rs.789 levels. Post the correction the stock went into a consolidation phase between Rs.700- Rs. 750 till the end of October for which it gave breakout early this November with a good above average volumes as seen in the chart. The stock has made fresh highs of 840 levels to end the previous month with a gain of 14.14% out-performing CNX Pharma considerably which ended the month with a gain of 3.49%. CCI (60) plotted above + 100 majority of the time during the July-September up move in the analysis and bounced backed from zero levels to above +100 zone after the retracement indicates the stock has a strong momentum and still is in bull phase. MFI (30) taking support at 40 levels during the retracement shows the stock is in strong bull trend. Stock taking continuous support of EMA 8 and 21 before the breach to recent higher highs shows trend in the stock is strongly intact. Thus any dips towards it short term moving averages will be good opportunity to accumulate 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 the potential targets of 910-950 levels. And any correction towards the 790 levels can be utilized to average the stock keeping strict stop loss placed below 754 levels. 4
Hindalco METAL 174 Buy 162 157 195 205 21 day EMA 160.82 165 180 50 day EMA 160.13 157 195 200 day EMA 152.30 151 205 Hindalco has outperformed CNX Metal last week and generated 8.11% return where CNX Metal has generated 1.15% return. The stock has given breakout from 160 levels and making higher highs and higher lows on daily charts. The stock has retraced 61.8% of it retracement levels drawn from the high of 199 levels to the low of 133 levels. The stock has seen strong buying interest last month outperforming peer group significantly suggest strength in the counter. Hindalco ended the November month with a gain of 6.32% as against the CNX Metals which ended at - 4.31%. Previously, the stock has moved from 98 levels to 198 levels with minor throwbacks and always respected its 50-EMA. The stock is currently trading well above the cluster of moving averaged pegged around 160 levels. Among indicators, the 14-Week RSI line is trading just above the 9-day EMA signal line pointing northward. The RSI has taken support around 49-50 levels and is currently trading around 58.25 mark which indicates that the stock still has a lot of room on the upside. On the weekly chart, the Bollinger Band (20,2) is also widening with current market price trading above the mean levels. The current momentum suggests the stock likely to diverge from mean to test the upper end of the band which is currently pegged around 195 levels. Our take: The fall in the stock is fizzled out and it rebounded from its recent low of 133 levels. We are expecting up trend in the stock will remain intact for near term. Any declines in the stock could be utilized for accumulation of long positions with a strict stop loss placed below 157 levels on closing basis for upside targets of 195 and 205 levels. 5
M&M AUTO 1323.75 Buy 1280 1250 1400 1450 21 day EMA 1271 1300 1385 50 day EMA 1284 1270 1400 200 day EMA 1189 1250 1435 M&M bounced has witnessed strong move during the last week of the previous month by gaining close to 6.2% on back of strong volumes indicating the stock has resumed it up trend after forming a strong base in the zone of 1220-1250 levels. Previously, the stock had made an all-time high of 1433.70 and witnessed selling pressure which hammered the stock for 1210.35 levels. Good accumulation is seen at lower levels and the pull backed 50% of the retracement levels drawn from the high of 1433.70 levels to 1210.35 levels on weekly chart. The stock is trading in higher high and higher low in weekly chart which give bullish stance. The Directional movement strength indicator, ADX on weekly charts, suggests that the stock is in a side way to uptrend after it recovered from lower levels and it is likely to carry on the expected up move in the near term. Also, the recent move in the stock has seen price crossover of cluster of short term and medium term moving indicating the correction in the stock is done with and it has resumed it uptrend to make fresh life time levels. Among the Daily oscillators, the 14-day RSI is trading comfortably above the 9-day EMA signal line and the MACD is trading in the positive territory above the 9-day EMA signal line. Our take: The stock has underperformed its peers in the recent past, but the recent momentum in the stock suggests it will bridge the gap of under performance in the near term. Also, if there is any rate cut in the coming RBI policy will fuel momentum further into the stock for upside up to 1400 and 1435 levels in the coming month. 6
PFC Finance 309.50 Buy 295 285 345 355 21 day EMA 289.30 292 321 50 day EMA 276.68 285 345 200 day EMA 245.69 250 355 PFC has given a break out of the downward sloping trend line drawn from the highs of 345 levels tested in June 2014. Prior to that, the stock witnessed profit taking from the recent high of 345 levels which drag the stock to the low of 219 levels. However the stock has seen pullback from lower levels and reflected V shape recovery on weekly charts. We expect the correction in the stock is done and the stock expected to continue its uptrend in the coming weeks. The stock outperformed the Nifty significantly last month and generated 9.69% of return when compare to 3.2% return generated by Nifty. The stock has given a breakout of consolidation range around 293-306 levels and closed well above the same during the last week. The recent price action and breakout has seen increase in deliverable quantity to trade quantity, which indicates strong hands are accumulating the stock at current levels. On the daily charts, the stock is trading above the short term and medium term moving averages placed between 276-299 levels, while the 200-day EMA shall act as a strong support for the stock in the near to medium term. These positive sentiments can help the stock to test higher levels and post a new 52-week high in near term. Among technical indicators, the 14-day RSI is trading above the 9-day EMA signal line pointing northwards and the MACD line trading in comfortable zone, indicating bulls to take charge over the counter which would take the prices up towards our mentioned target levels. Our take: The above said statement indicates the strength in the stock and momentum likely to continue in the stock during current month and also any rate cut by RBI will propel momentum further. Thus, we recommend accumulating the stock for targets of 345 and 355 levels with a stop loss placed below 285 levels. 7
Tatachem Agri 437.20 Buy 419 400 480 495 21 day EMA 420.66 420 447 50 day EMA 406.00 412 460 200 day EMA 354.00 402 480 Tata Chem ended on a higher note by more than 7% for the month of November, 2014 and also witnessed decent deliverable volumes of around 38% on the last trading day of the month of November. The stock is making higher high and higher lows on weekly charts for the last 1 year indicating strong uptrend. The ADX reading on monthly chart is around the 23 levels, indicating the strengthening of the primary uptrend. The Stock is trading well above its short term and long term moving averages. In all these period stock prices respected its 50-Days SMA is also an indicator of its overall strength. On the weekly chart, the counter has been trading along the upper end of Bollinger Band and is expected to continue its momentum along the upper band assisting the current uptrend, to remain intact. On the other hand, any dip can be used for averaging the long position in the stock. Parabolic Stop and Reverse on weekly charts is trading below the price, suggesting buying will remain intact in the stock. The MACD line is trading in the positive territory above the central line, indicating positive sentiment. The Fibonacci Retracement plotted from a low of Rs.233 to a high of Rs.422 on monthly charts, suggests that the stock is holding well above its 23.60% retracement of the said up move which is a positive sign in itself. Extending the analysis by Fibonacci extensions from the lows of Rs 371, we expect the stock extend to 61.8% extension which is pegged around 488 levels and we see the targets likely to be achieved in the coming weeks. Our take: The stock is expected to continue its bullish trend and move towards Rs 480 and higher levels in the coming weeks. However, any near term correction in the stock towards Rs 419 levels due to its strong out-performance recently, we recommend to utilize the correction as better buying opportunity in the stock with a stop loss placed below Rs 405. 8
Tata Global Beverages FMCG 161.30 Buy 152 146 178 185 21 day EMA 157.98 158 170 50 day EMA 158.30 152 178 200 day EMA 155.73 146 185 Tata Global has given a breakout to the cluster of moving averages trading between 155 to 159 levels. The stock has gained close to 4.60% in the last three trading sessions with soaring volumes. The current price action with increasing volumes indicates bulls have taken charge over the counter and can drive the momentum towards our projected targets of 178-185 levels in the near term. Previously, the stock has made an all time high of 181.50 during November 2012 and had corrected towards 120 levels, being the support of the upward sloping trend line. Thereafter, it has been trading along the upward sloping channel by making higher highs and higher lows on the weekly chart. The stock has moved above its crucial resistance of 160 and has closed above the same, indicating the strength in the recent move of the stock. On Monthly chart, the stock is trading along the upward sloping trend line and is currently placed at a comfortable level to buy. The stock is trading above all its moving averages on the daily chart and above the 13-week EMA on the weekly chart. This suggests the bullishness in the counter and any dip towards the moving averages can be used for fresh accumulation. Among technical indicators, the 14-day RSI is trading comfortably along the 9-day EMA signal line and the MACD line is in the positive territory, indicating bulls to take charge over the counter which could take the prices higher in the near-term. Our take: We recommend buying into the stock based on the above said fact for upside targets of 178 and 185 levels with a stop loss placed below 146 levels. 9
Titan Consumer Durables 370.85 Buy 362 353 395 410 21 day EMA 375.18 360 382 50 day EMA 377.44 353 398 200 day EMA 321.72 345 412 TITAN remained our favored pick amongst consumer durable stock basket. In last ten months stock prices climbed from the lows of 200 levels to recent all time high of 425 in the month of October, post which it witnessed round of profit booking. In the last couple of weeks the stock has been consolidating in the range of 355-380 levels making the base for another leg of rally. The stock in daily charts has taken support at 100-DMA, which is currently pegged at around 364 levels. While, the cluster of short term moving averages is pegged between 374-380, above which we feel the stock can carry on the momentum towards above mentioned targets levels. Among indicators, the 14-day RSI line just crossed the 9 day EMA and diverging in the daily chart. The RSI has taken support around the 40 levels and is now trading around the 45-42 mark which indicates that the stock still has a lot of room on the upside. On the weekly chart, the counter has tested the lower band and created a primary candle indicating a possible uptrend towards mean. The primary candle is a bullish harami pattern which is another sign of trend reversal. We expect the correction in the stock is done and will resume it upward momentum in the current month. Our take: The upside momentum in the stock will aggravate if the stock crosses the resistance of 375-380 levels. Thus we recommend buying into the stock with a stop loss placed below the recent low o 353. 10
Wipro Software 585.80 Buy 561 548 620 645 21 day EMA 572.03 570 607 50 day EMA 569.68 561 621 200 day EMA 546.07 548 644 Wipro is our preferred pick in the information technology space for the month of December. The stock has been a laggard in the whole IT pack rally from past few months and we expect the stock likely the bride the under performance during the current month. On the daily charts, the stock has seen a sharp decline in the month of October from the levels of Rs 621.90 to Rs 547.15. Thereafter it took support a tad above its 200 day moving average where it made strong base and gradually moved higher during the months. After finding the said support, the stock has given a smart pullback and again started its up move making higher highs and higher lows on the weekly charts. The stock is also giving a U shape recovery on the weekly charts and has a great chance of breaching its 52 week high in the coming trading sessions. The Fibonacci Retracement plotted from a high of Rs.621.90 to a low of Rs.547.15 on daily charts, suggests that the stock is holding well above its 50.00% retracement of the entire up move, which is itself a strong bullish indicator. The parabolic SAR (Stop & Reverse) is also below the trading price, suggesting northward momentum is likely to remain intact in the counter. The stock is also trading above all of its short and medium term moving averages with technical indicator 14 day RSI showing reading above 60 levels pointing in northward direction indicating the bullish trend to remain intact in the counter. Our take: Considering all the above data facts with dollar strengthening against the INR, we expect momentum to continue in the stock to make fresh 52-week highs in the coming week. Thus, we recommend buying into the stock for targets 620 and 645 levels with a stop loss placed below 548 levels. 11
KARVY RESEARCH DESK STOCK BROKING JK Jain jambu@karvy.com +91-9618087899 Karvy Stock Broking Limited Karvy Centre, Avenue-4, 2nd Floor, Road No: 10, Banjara Hills, Hyderabad 500 034. India. Tel: 91-40-23312454; Fax: 91-40-23311968 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