Considering the current market scenario, it would be safer to invest in consumer and rural centric stocks like Dabur India, Britannia as well as Rallis India, Ajit Mishra, Vice President, Research, Religare Broking Ltd, said in an interview with Moneycontrol’s Kshitij Anand.
Q) It was a roller-coaster ride for traders in the truncated week. The Nifty failed to hold on to gains and closed in the red for the week that ended on August 16. What do you see for the markets in the coming week? And, what are the important support and resistance levels to watch out for?
A) We feel that the Nifty would further consolidate in the coming week within a broader range of 10,750-11,250 and either side of the breakout will trigger the next directional move.
Traders should closely keep an eye on the banking index as that could play the key role.
Q) Some of the stocks which are putting a brave face in a downtrend are the ones which are hitting fresh 52-week highs, which include names like Avas Financiers, Apollo Hospitals, SBI Life Insurance, Trent etc. among others. Do you think the momentum is likely to continue in these stocks?
A) The momentum in the above-mentioned stocks is a result of strong quarterly performance in Q1 FY20, wherein most of the other companies (including few Nifty majors) reported tepid results.
SBI Life is one of the best performing life insurance companies and may have some more room for upside.
Apollo Hospitals, apart from delivering a strong quarter, has guided for debt reduction and stated that it is likely to reduce promoter pledge.
Trent posted strong revenue and profits. However, a continuation of this outperformance will be the key for a greater upside in these stocks.
In addition, since stocks are hovering around their 52-week highs, profit booking cannot be ruled out, given that the market conditions are volatile and being influenced by global uncertainty.
Q) Any particular stock(s) which you prefer to buy on dips considering the fact their fundamentals are intact but are largely falling due to external factors?
A) Considering the current market scenario, it would be safer to invest in consumer and rural centric stocks like Dabur India, Britannia as well as Rallis India.
The Ayurvedic segment in India is expected to grow at around 16 percent CAGR over 2016-2021. Dabur, a leading Ayurveda and natural product maker company in India, is well placed to capitalize the opportunities in its business segment on the back of increasing consumer demand, innovating new products across categories and expansion in geographical footprints.
In addition, the company has posted a decent Q1 FY20, which was largely in-line with our expectations. Going forward, it would invest in its power brands, increase advertisements on digital platforms and focus more on product innovation across categories.
We believe that the FMCG sector is likely to face challenges in the near-term due to a rural slowdown; however, a revival is expected in the medium to long-term.
Further, management expects a revival in the economy and thus it continues to focus on its strategy. It would continue to strengthen its presence by increasing market share, expanding distribution reach in both the rural and urban areas, premiumizing and launching innovative products, steady capacity addition, and improved product mix. Hence, we remain positive on Britannia’s long-term growth prospects.
In Indian agriculture, the utilization of crop protection and agrochemicals in improving farm productivity is still low. This provides an immense scope for market expansion for Rallis.
It posted decent numbers in Q1 FY20 and is attractively valued at current levels. Further, several growth initiatives undertaken by Rallis, and a forecast of a normal monsoon this year bodes well for its growth. These factors make it a good long term investment bet at current levels.
Q) In terms of technicals, are there any stocks which witnessed a breakout in terms of MACD, Stochastic, or Bollinger Band?
A) We primarily select stocks on the basis of price-action and use the above-mentioned indicators and oscillators for confirmation or timing.
We are bullish on Berger Paints, Marico, and Bata India as they’ve witnessed an upward breakout of late and trading at their record high despite weak broader trend. On the flip side, Lupin and Sun Pharma can be candidates for creating short on the bounce.
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his 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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