The Indian economy is going through a rough patch. Gross Domestic Product (GDP) growth is at a six-year low, advancing 5 percent in April-June, compared to 8 percent in the year-ago period. Poor earnings season along with global cues have further worsened investor sentiment.
The future appears bleak too as earnings are unlikely to pick up unless there is a meaningful recovery in the economy. Nonetheless, there are still quite a few stocks with sound fundamentals that are available at attractive valuations.
Traders mostly covered their shorts which they probably initiated at the beginning of the week. The total tally of change in open interest for Nifty futures remains close to zero.
Foreign direct investment (FDI) in India grew by 28 percent to $16.33 billion during the April-June quarter of 2019-20 (Q1 FY20). As per latest figures released by the Department for Promotion of Industry and Internal Trade, the foreign fund inflows in April-June 2018-19 stood at $12.75 billion.
Key overweight sectors include corporate banks, insurance, healthcare services, oil and gas, construction, engineering and logistics. On the other hand, key underweight sectors are automobiles, auto ancillaries, metals, FMCG, consumer durables and building materials.
Volitality index, India VIX, which measures market's expectation of near-term volatility, rose more than 30 percent in just 2 months. The index rose from 13.06 on July 5 (the Budget Day) to 17.27 levels on September 5, a 32 percent rise, data shows.
Consequently, the Nifty50 has fallen by over 8 percent in the same period. The index dropped from 11,811 recorded on July 5, to 10,847 on September 5 which translates into a fall of over 8 percent.
Here are the top 3 ideas from brokerage firms which can give handsome returns in the short to medium term:
Choice Broking on Gruh Finance: Buy around Rs 252 | Target: Rs 266 | Stop loss: Rs 244
Gruh Finance bounced back after taking a support of around Rs 243.50 level which is 61.8 percent retracement level of its previous move from Rs 227.30 level to Rs 269.70 level. This suggests bulls may take charge in the counter.
Moreover, the stock has started to trade above its 100 Hourly Exponential Moving Average which shows a positive move in the counter. Additionally, the stock has reversed back after taking a support of its previous support level which suggests bullishness in the counter.
Daily momentum indicator RSI reading is at 48.31 level with a positive crossover which points out for a positive breath in the stock. The research firm expects an upside movement in the counter in few trading sessions.
Choice Broking on HDFC Life Insurance Company: Buy around Rs 533-537 | Target: Rs 558 | Stop loss: Rs 523
HDFC Life bounced back from of its lower band of Symmetrical Triangle formation which shows stock may accelerate in coming trading sessions. On the daily scale, the stock has reversed back after taking a support of its previous support level which suggests bullishness in the counter.
Additionally, the stock is sustaining above its 21 Days Exponential Moving Average which shows a positive move in the counter. A daily momentum indicator RSI reading is at 56.27 level with a positive crossover which points out for a positive breath in the stock.
Based on the above technical structure, the firm expects a good upside movement in the counter in few trading sessions.
Anand Rathi on Dilip Buildcon: Buy | Target: Rs 586
To monetise five of its twelve newer hybrid annuity projects, Dilip Buildcon has executed an agreement with Cube Highways. This is in sync with its strategy to focus on its strength as an EPC contractor rather than as an asset holder.
Of the required Rs 570 crore infusion, Dilip Buildcon ideally would infuse Rs 290 crore for its 51 percent share; Cube would then invest its share, (as OCDs) provided the five projects have adequate RoW, and attained suitable physical progress, among other conditions.
At COD, toward its investment, the company would receive Rs 180 crore on conversion into equity of the OCDs (with rights to a 49 percent stake); the balance receipts of Rs 230 crore would come two years from the COD. Subject to adjustment for the liabilities, the deal pegs the equity value for the 100 percent stake at Rs 702 crore.
At the CMP price, the stock trades at P/Es of 7.1x FY20e and 6.6x FY21e. Anand Rathi currently have a Buy rating on it, with a target of Rs 586. It values the company on a sum-of-parts approach, the construction business using a PE multiple of 10x FY21e, and the asset-ownership business at 1x FY21e invested value.
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