Experts believe that the market may remain volatile as traders will roll over and unwind their positions in the futures & options (F&O) segment, because of scheduled derivative expiry of September month contracts on Thursday.
The BSE Sensex and NSE Nifty gained around around 2.5 per cent last week supported by positive macro economic data and US Federal Reserve decision not to raise the interest rates. According to market experts, the outcome of events and data during the last few weeks have raised hopes among the participants for a rate cut in RBI’s September 29 monetary policy review, clearly reflected through the recovery in banking space. Besides, rotational buying in other sectors also aided index to sustain at the higher level.
The BSE Sensex and NSE Nifty advanced 608.70 points and 192.60 points to 26,218.91 and 7,981.90 on September 18 from 25,610.21 and 7,789.30 on September 11. Barring the Consumer Durables index (down 3.30 per cent), Capital Goods index (down 2.41 per cent) and Auto index (down 0.43 per cent, rest all other sectoral indices on the Bombay Stock Exchange ended last week in green. The BSE Bankex jumped the most— 5.05 per cent at 19,952.94, it was followed by BSE Power index (up 3.72 per cent), BSE Realty index (up 3.72 per cent) and BSE Healthcare index (up 3.06 per cent).
The Sensex was trading 110.65 points down at 26108 in the noon trade today. Nifty was also down by 32 points at 7,950 during the same time.
Though there is no major data lined up this week but Jayant Manglik, president, retail distribution, Religare Securities believes that the market may remain volatile as traders will roll over and unwind their positions in the futures & options (F&O) segment, because of scheduled derivative expiry of September month contracts on Thursday. Further update on monsoon and currency move would also influence the domestic bourses to some extent so traders should keep an eye on them for further cues.
Manglik, said, “The only concern that we have now is lack of broader participation which is indeed essential for markets to march further northward and sustain at higher level. If things fall in place, Nifty has potential to retest 8,200 mark in the coming sessions. Considering the prevailing scenario, we suggest traders to maintain positive yet caution approach and keep trailing stop losses with every rise. For investors, we uphold our advice to gradually accumulate quality stocks from private banking, NBFCs, auto, capital goods alongside with IT and pharma.”
Nitasha Shankar, VP research, YES Securities, said, “Uncertainty will continue till the next Fed meet which will keep upside capped in our opinion. As for the Indian markets the next event that investors would be eyeing will be the RBI meet. A rate cut would help in reviving the positive sentiment.”
Keeping the stock markets volatility in focus, brokerage houses suggest below given 5 stocks that could be a good investment bet:
Pantaloons Fashion & Retail
Recommended By: Sharekhan
Why Buy: The share price of Pantaloons Fashion & Retail (PFRL) jumped 76 per cent in the past one year to Rs 220.70 on September 18. On the other hand, the benchmark index BSE Sensex slid 3.29 per cent during the same period. Sharekhan sees over 20 per cent upside in PFRL stocks.
In a research note, the brokerage house said, “We believe that the combination of Madura with Pantaloons business in the form of Aditya Birla Fashion and Retail Limited (ABFRL), would present investors with a play on the enviable portfolio of brands across segments, categories and price points with strong capital efficiency and multiple levers to drive revenue and the earnings performance. We have a positive view on PFRL and expect the stock to deliver over 20-25 per cent upside from the current level in the medium term. Further, addition of Madura portfolio into the business will augment its business potential.”
Recommended By: Nomura
Why Buy: Suzuki showcased its latest premium hatchback – “Baleno” – at Frankfurt Motor Show last week. Based on all-new architecture from Suzuki, Maruti Suzuki (MSIL) is likely to launch this in India by the end of October 2015, and it will be sold only through premium NEXA outlets. Initial specifications and designs look encouraging. Nomura in research report said, “We currently factor in around 2,500 units of Baleno sales per month in 2015-16 and 2016-17, but there can be upside as Honda Jazz and Hyundai i20 Elite have monthly volumes of 6,500 – 11,000 units. This car will fill a key gap for MSIL in the premium hatchback space and has the potential to dent Jazz and i20 sales.”
The car could be priced at a 20 per cent premium to Swift, which will also help the ASP of MSIL. Management’s target of over 10 per cent of MSIL’s volumes coming from newly launched NEXA outlets by 2020 indicates monthly volumes of over 20,000 from premium models (S-Cross, Baleno and other models). This model will be produced exclusively in India and the company plans to export this to other key markets too, like Europe, Japan etc. According to Nomura, the share price of MSIL can touch Rs 5034 in the next few quarters. On September 18, the share price of MSIL was at Rs 4,403.
Recommended By: ICICI Securities
Why Buy: Arvind (Arvind) continues to get strategically transformed from a textile manufacturer to a major garmenting and brand house with a portfolio of major brands, which capture the “Adopt the West” strategy. The company’s position as No 1 denim manufacturer coupled with its verticalisation strategy of garmenting capabilities and entrenched retail reach position it as the most favoured integrated textile player. According to ICICI Securities, revenues are expected to grow at 13 per cent CAGR in FY15-17 mainly driven by its brands business. However, restructuring of Megamart and scaling up of its existing brands would consolidate profitability at current levels. The brokerage house believes Arvind is best suited to capture the immense growth opportunity in the branded apparel segment and its share price can touch Rs 330 in the next 12 months. The scrip was at Rs 284.10 on Friday.
Recommended By: Edelweiss
Why Buy: Management of Federal Bank highlighted that margins are likely to be stable to improving going forward as improvement in CASA ratio plays out. Moreover, repricing of high cost deposit during the quarter will further benefit funding cost. The bank expects marginal pressure on yields to be offset by with declining funding cost and estimates NIMs to be in the 3.10-3.25% range going forward. The bank is also confident of maintaining asset quality and anticipates the second quarter of 2015-16 to be better than the first quarter. According to Edelwiess, the share price of the company can touch Rs 82 in the next few quarters. On September 18, the share price of Federal Bank was at Rs 63.15.
Recommended By: IndiaNivesh Securities
Why Buy: Atul Auto is the only pure play 3‐wheeler manufacturer in India. With around 17.9 per cent share in the goods carrier segment and 5 per cent share in the passenger carrier segment, the key brands of the company are Shakti, Smart, Gem and Gemini. Despite challenging macro environment the company has performed well in last couple of years (25 per cent CAGR growth in revenue and 21 per cent CAGR growth in volume from FY11 – FY15). Volume have been improving on the back of added dealerships and increasing geographic presence (especially in Semi Rural and Rural area) along with market share gains in existing markets. IndiaNivesh Securities believes with further capacity addition and new petrol product launch, Atul can efficiently tap export markets along with urban markets in India and, thereby, continue the strong growth momentum. The entry into petrol segment, increasing capacity and overseas footprint could lead to faster growth in market share in the coming years. The brokerage house expects the share price of the company can touch Rs 471. On September 18, the scrip was at Rs 417.
(Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online)