ICICI Direct’s stock filtration model flashing ‘buy’ for these shares with as much as 19% upside

By: |
May 11, 2021 3:00 PM

Using their three-factor stock filtration model, domestic brokerage firm ICICI Direct has arrived at two stocks that it believes have the potential to hand investors significant returns in the near term.

Stocks to buyThe brokerage firm picks stocks from the F&O universe. (Image: REUTERS)

Domestic benchmark indices have remained range-bound for the last few months now. Amid such market movement, analysts have been advising investors to go for stock-specific trades. Using their three-factor stock filtration model, domestic brokerage firm ICICI Direct has arrived at two stocks that it believes have the potential to hand investors significant returns in the near term. ICICI Direct has filtered stocks based on a pickup in delivery, historic volatility and historic stock buying patterns.

The brokerage firm picks stocks from the F&O universe. Further, the two-week delivery pick-up is compared with the last three months delivery pattern. The delivery Z-score is compared and a higher Z-score indicates a higher increase in delivery per unit of risk. The stocks are filtered after checking historic volatility. “If the standard deviation comes lower, it suggests the lower pattern of historical volatility, which, in a way, suggests the accumulation in the stock,” ICICI Direct said. “Thus, combining with delivery Z-score, frequency distribution of the stock returns and the historical volatility pattern, we can filter stocks that can be given from a positional perspective and can be outperformers,” they added.

Stock picks


Target: Rs 2,950; Stop Loss: Rs 2,348

ICICI Direct highlighted that HDFC has underperformed in the current market up move but has now seen a pullback with better-than-expected results. “However, the stock has been exhibiting significant accumulation in its price distribution pattern. The daily returns are largely distributed from 0% to 2%,” ICICI Direct said. 

Delivery has been improving for HDFC. ICICI Direct believes fresh delivery buying was evident. As people are accumulating the stock at every level. “The Z score has also been exhibiting high delivery activity that took place in the stock recently,” they added. On the volatility front, the 30-day volatility moved higher than its 60-day volatility due to the sharp-up move being seen in the stock. This is expected to subside soon with the ongoing momentum continuing in the stock. 

Currently, the stock trades at Rs 2,468 per share, translating to 19% upside. ICICI Direct recommends buying in the range of Rs 2,525 – 2,565 apiece for a three-month time frame.

Federal Bank

Target: Rs 92; Stop Loss: Rs 71

While leading financial stocks moved higher in the last three-four months, Federal Bank has remained range-bound. Now, ICICI Direct believes the price distribution suggests limited downside movement in the stock. “The majority of the reading for the stock is in the 0-2% range. We believe it may resume its upward bias after the ongoing consolidation,” the brokerage firm said.

Federal Bank has seen improvement in delivery in the last few months. “Moreover, the Z score remained in the positive territory suggesting increased delivery volume along with recent upsides suggesting strong hands are accumulating the stock,” the report added. Although volatility has been on the higher side, ICICI Direct expects the same to subside resulting in fresh momentum in the stock.

On Tuesday, Federal Bank was trading at Rs 81.75 per share. The stock will have to surge 12% from current levels to reach the target price. ICICI Direct advises investors to buy in the range of Rs 78 – 80 per share for a three-month time frame.

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