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Wednesday, June 26, 2013

Stocks that can rally over 12-38% in medium term

The Indian markets have corrected sharply in the recent past on concerns of pick-up in economic activity in the US, firm dollar, weak rupee and high current account deficit. 

Analysts are of the view that the Indian markets are reacting in line with other emerging markets on concerns of tapering down of stimulus package in the US. The correction in the market should be used to buy quality stocks on decline, they say. 

Following are recommendations on stocks that can rally over 12-38 per cent in a short to medium term: 

A K Prabhakar, Senior Vice President - Equity Research, Anand Rathi: 

Reliance Industries (upside 12%): 

The stock has been trading within a range of Rs 770-Rs 850 for a period of almost 2 months. We expect it to move upwards from current levels as it has outperformed the index by not cracking as much as the other index stocks did. 

The stock is trading above all major moving averages and a possible target of Rs 910-920 is on the cards. The stock has also taken the Andrews pitchfork support at levels around Rs 780, which suggests that the stock could reach its target within the specified time-frame. 

Buy the stock in the range of Rs 795-817 with a stop loss of Rs 749 for a target of Rs 909. 

Reliance IndustriesBSE -0.16 % has been in news recently after its subsidiary Reliance JioInfocomm partnered with global companies like Samsung, Ericsson, and Alcatel Lucent to build up a full-fledged 4G ecosystem. 

Torrent Pharma: (upside 20%) 

The stock gapped-up (Rs 735-744.8) on May 31 and after that it made an all-time high of Rs 872. For the next 12 trading sessions after hitting an all-time high, it has been consolidating. The stock can now touch the target Rs 935 & 990 in the next few months. The stock on Monthly chart was shown rising wedge pattern, which is a powerful indicator on the charts. 

Torrent has entered newer segments of gynecology and oncology. Both segments are high growing segments which will drive the company revenue going forward. Domestic sales are expected to grow by 14 per cent between 2014-15 on the back of improvement in mix, increasing focus on urban market and management focus on enhancing employee productivity. 

Torrent has been cash cow since the last 5 years. The firm is consistently generating free cash flow to firm in spite of 80-90 per cent reinvestment rate. 

Manav Chopra, CMT, Technical Research Analyst, Nirmal Bang: 

Tech Mahindra: (upside 15 per cent) 

The stock has been in a short-term downtrend since March'13 forming a series of lower highs and lows and the decent halted in mid April'13 around the Rs 910 levels. The stock formed multiple bullish candles near the support clusters which kept the bulls interested. The stock on the weekly chart formed bullish candles with lower shadows, indicating bullish bias and limited downside from the current levels and a high risk/reward for long positions. 

The stock has breached the descending triangle pattern with a bullish candle accompanied by above average volumes which has confirmed a trend reversal and resumption of the original trend. The overall parameters suggest a short term trend reversal and resumption of the original trend and in the near future the stock is likely to exceed its recent March'13 highs as the oscillators on the higher time-frame charts continue to remain in the positive mode. 
Buy the stock with a stop loss of Rs 945 for targets of Rs 1,115 and Rs 1165 in the next 2-3 months. 

Tech Mahindra completed the merger of its unit Satyam Computer Services with itself, making it the No 5 Indian IT services provider. The merged entity creates a technology services powerhouse with revenues of $2.7 billion and a team of 84,000 professionals servicing 540 customers across 46 countries, the company said in a statement. 

KPIT Cummins: (upside 38.80 per cent) 

The recent April'13 bottom for KPIT Cummins was a high probability reversal area and a strong support cluster zone as it coincided with the long term rising trend line drawn from the February'09 low, 61.8 per cent retracement levels of the previous rise and 20 sma. The stock formed multiple bullish candles near the support clusters which kept the bulls interested. 

The stock on the weekly chart formed a Bullish Engulfing pattern which indicated limited downside from the current levels and a high risk/reward for long positions. There is absence of negative divergence and positive reversal pattern in RSI on the monthly charts, which suggests that the advance is not yet done and one can expect further rallies into this counter. 

The stock has also breached the falling trend line drawn from the September'12 highs, which has confirmed a trend reversal and resumption of the original trend. 

Buy KPIT Cummins with a stop loss of Rs 102 for targets of Rs 155-165 in the next 4-5 months. 

Bharat Forge will form a joint venture with KPIT Cummins Infosystems to produce and market the hybrid technology system, REVOLO, for automobiles. Designed and engineered by KPIT Cummins, the hybrid system is claimed to increase the fuel efficiency and engine performance of both the existing and new vehicles in order to decrease green house gas emissions.

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