Diwali Recommendation

INFOSYS 

CMP : Rs 666.35
BSE Code : 500209
Target 1 ..... Rs 795.00
Target 2 : ....Rs 860.00 

Infosys is India’s second largest IT company which provides IT solutions to financial services, manufacturing, energy & utilities, communication & services, retail, consumer packaged goods & logistics and life sciences & healthcare. The company’s continued large deals win, revival in core verticals such as BFSI and retail, growth in top accounts and traction in digital segment (31 per cent of Q2FY19 revenue) gives us healthy revenue visibility for the coming quarters. Notably, the company’s management has maintained its FY19 revenue guidance in constant currency terms at 6 to 8 per cent and operating margin guidance at 22 to 24 per cent. 

The stock of Infosys had given a triple top pattern breakout at Rs 746-748 on October 1 and made a new all-time high near Rs 755 level. However, the stock could not sustain the levels of Rs 746-748 on a closing basis and corrected from these levels, making lower tops and lower bottoms. On October 26, the stock hit a low of Rs 630, which was its 200-day EMA level. Thereafter, it gave three consecutive daily upticks, where it breached its 100-day EMA on the upside. Meanwhile, the oscillators signalled bullish reversal with a positive crossover and justifiable volumes. On the monthly time frame too, the stock has reversed from 38.2% retracement of the prior upward rally from Rs 431 to Rs 755. 

BALKRISHNA INDUSTRIES 

CMP : Rs 1130.45
BSE Code : 502355
Target 1 ..... Rs 1363
Target 2 : ....Rs 1445 

Balkrishna Industries is involved in the 'off-highway' tyres segment that caters to agricultural and industrial segments. The company enjoys 5 per cent global market share in the USD 15 billion OTR market, the company’s management aims to take this market share to 7.5-8 per cent in the coming two-three years. The company’s plan for backward integration with ramping-up its carbon black capacity from 60,000 MT to 140,000 MT by FY20-21E would help it to reduce costs and thereby improve its margin going forward. The low penetration in the US market, along with rising opportunity in mining industry, are likely to aid revenue growth. 

The stock of Balkrishna Industries has been trading with higher tops and multiple supports at Rs 1015 level. The stock has taken support near Rs 1015 and has given a consistent upside rally, hitting higher highs every time, forming an upward sloping rally. The stock hit all-time high at Rs 1467 level, formed a 'shooting star' pattern and retreated sharply more or less up to the multiple support at Rs 1015. Considering the weekly time frame, the stock consolidated for three consecutive weeks after taking support at 100-period EMA, followed by an attempt for a breakout in the recent week. On the daily time frame, the volumes are picking up and oscillators are heading towards the 55 level, suggesting momentum. Thereby, we see a bullish reversal in the stock 

POWER FINANCE CORP 

CMP : Rs 94.70
BSE Code : 532810
Target 1 ..... Rs 112
Target 2 : ....Rs 122 

Incorporated in 1986, Power Finance Corporation (PFC) is a Schedule-A Navratna CPSE and is one of the leading non-banking financial company (NBFC) in the country. It is a specialised financial institution in the power sector and is a dominant player with a market share of 20 per cent. The company has total loan asset book of Rs 2,78,000 crore, out of which 82 per cent is from the government sector and the rest 18 per cent is from the private sector. The power sector has seen some signs of revival with improved financial and operational performance. Going forward, the increased government focus and spending on the power sector bodes well for the PFC. 

The stock of Power Finance Corporation had given a 'megaphone' pattern breakdown at Rs 110 level on February 27 and thereby plunged up to its 52-week low level of Rs 67.60 where it hit a double bottom on July 16 and 17, followed by a bullish reversal. The stock had been witnessing multiple resistances near Rs 90.50-91.50 initiated since March 2018. It hit a high at Rs 90.70 on September 10 and retreated yet again near Rs 72.50, where it hit a triple bottom. The stock rallied supported by a spurt in oscillators from 38 to 72 and rising volumes. The stock succeeded in breaking the multiple resistances at the end of October. 

ASTRAZENECA PHARMA 

CMP : Rs 1702.20
BSE Code : 506820
Target 1 ..... Rs 2080
Target 2 : ....Rs 2150 

AstraZeneca is a global, innovation-driven bio-pharmaceutical company that focuses on the discovery, development and commercialisation of prescription medicine. The company continues to prioritise investments in its focus areas in line with its global growth platforms. Besides, fasttracking new product launches and maintaining timelines of key regulatory milestones to align with the global pipeline are likely to help the company to sustain its revenue growth in the coming years. Due to the introduction of new brands to the Dapaglifozin and Saxagliptin franchise, the company would continue to provide additional options for the betterment of diabetic patients, which bodes well for the company. 

Astrazeneca Pharma formed a 'shooting star' pattern at 52-week high level at Rs 1960 on August 27 and, thereby, retreated up to Rs 1455 on October 1, where it formed a hammer. The stock consolidated for five consecutive trading sessions, where it took support at its 100-day EMA line on a closing basis. On the weekly time frame, the said level is near the 50% retracement of the upward rally from Rs 922 to Rs 1960. Thereby, the stock has gradually bounced back with gradual volume pick-up and 14-period RSI near the 55 level. With this bounce, the stock breached its prior resistance at Rs 1757, followed by 1765, on an intra-day basis. 

WEST COAST PAPER 

CMP : Rs 399.15
BSE Code : 500444
Target 1 ..... Rs 467
Target 2 : ....Rs 485 

West Coat Paper Mills has made aggressive expansion (growth and modernisation) plans to capitalise on the opportunity arising from growing demand in the paper and cable divisions. The company has spent Rs 150 crore in FY18 and is targeting to further spend around Rs 180 crore in FY19 at the Dandeli facility for upgradation and expansion. Also, the company is likely to spend around Rs 110 crore for expansion of the cable division. During the fiscal period of 2014-18, the company has repaid debt of Rs 637 crore. Going forward, paper producers are expected to benefit from the tight global pulp market conditions due to strong demand and limited capacity additions and the current weak rupee environment, as the domestic paper prices are now based on import parity prices. 

The stock of West Coast Paper gave a symmetric triangle pattern breakout on July 25 at Rs 273 level and, thereby, it surged straight up to Rs 399.90 on September 7, where it hit a Doji. The stock corrected up to 61.8% retracement of the upward rally from Rs 243 to Rs 399.90, which was near to its 100-day EMA support level and bounced back sharply forming a rounding base pattern on the daily time frame. Meanwhile, the stock breached its two major resistances at Rs 370 and Rs 387.50, heading towards all-time high at Rs 399.90. The volumes are picking up and the 14-period RSI is quoting above 60. 



LARSEN & TOUBRO INFOTECH 

CMP : Rs 1763.20
BSE Code : 540005
Target 1 ..... Rs 1990
Target 2 : ....Rs 2100 

L&T Infotech (LTI), a part of the Larsen & Toubro conglomerate, is involved in offering IT services. The constant large deal wins, addition of large logos to its roster, wide digital offering with its own product IPs (MOSAIC offerings), coupled with continued investment in traditional/ digital offerings are likely to keep LTI’s momentum going in the coming quarters. In terms of margin, we expect LTI’s emphasis on growing offshore agile delivery would protect it from the growing onsite supply side constraint which, in turn, would boost margins going forward. The operating margin has increased from 17 per cent in Q3FY18 vs 21 per cent in Q2FY19. The company is focusing on digital operations and ‘API’-fication of processes where spending is continuously on the rise. 

Considering the weekly time frame, the stock gave a 7-week consolidation breakout in the September 7 week and surged up to its all-time high at Rs 1985-1990, where it hit a double top. Thereafter, the stock corrected up to 50% retracement of the prior upward rally from Rs 1270 to Rs 1990 twice and has bounced back in the current week. On the daily time frame, the stock took support at the 200-day EMA level and surged above its 100-day EMA level on October 31. The volumes are justifiable and the stock is seen giving a positive divergence between the prices and the 14-period RSI, where the RSI is nearing its prior resistance at 50.