Two PSU stocks are expected to gain as much as 14% in the coming months while benchmark indices continue to sit near all-time highs.
Two PSU stocks are expected to gain as much as 14% in the coming months while benchmark indices continue to sit near all-time highs. Domestic brokerage and research firm ICICI Direct has used its three-factor stock filtration model to narrow its stock picks down to two PSU shares, Steel Authority of India (SAIL) and Canara Bank, as those that could post strong up-moves based on a pickup in delivery, historic volatility and historic stock buying patterns.
ICICI Direct has picked the two stocks from a large number of shares that are a part of the Futures & Options universe. Analysts have further analysed the two-week delivery pick-up in the said stocks, 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.
Target price – Rs 195 per share
Canara Bank is the third-largest public sector bank in the country. “Canara Bank has failed to perform in line with the markets and remained under pressure despite continued buying in the markets. However, the stock is exhibiting significant accumulation in its price distribution pattern,” the brokerage firm said. The 30-day volatility has moved higher for the stock compared to the 60-day volatility. However, analysts believe this should subside as stock momentum continues.
From a delivery perspective, despite range-bound move seen in the last couple of weeks and underperformance compared to the index, analysts say, delivery activity is clearly visible. “It seems like there is ongoing accumulation in the stock at lower levels. The Z score has also hovering towards positive territory suggesting buyers accumulating the stock,” they added. From today’s opening price, the stock could gain 10% to reach the target price. ICICI Direct has a 3-month time frame for the trade with a recommended stop loss at Rs 148 per share.
Target price – Rs 132 per share
Metal stocks have corrected in the last few months after a strong outperformance earlier. SAIL share price has moved nearly 18% lower since the middle of May. However, after a round of consolidation, a fresh up move is likely to be seen in metal stocks, said ICICI Direct. They added that the price distribution for SAIL is suggesting limited downside movement in the stock.
On the delivery front, ICICI Direct said that the last couple of weeks saw below average delivery as SAIL shares were consolidating near its support zone. “The Z score has reached its support. We expect the fresh delivery at the support zone,” they added. Both 30-day and 60-day volatility continued to remain low for the stock. “Going ahead, we expect 30-day volatility to decline further from current levels, which may provide fresh momentum,” ICICI Direct said.
From today’s opening price the stock could gain 14% to reach the target price. ICICI Direct recommends a stop-loss at Rs 99 per share for the trade with a time frame of three months.
(The stock recommendations in this story are by the respective research and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)