Diwali Recommendation
MARICO LTD.
CMP : Rs394.65
MARICO is into the FMCG business, particularly in the hair grooming products segment. The company has been in consolidation for the last one year and is on the verge of a breakout from a 61-week multiple resistance area. It has been delivering positive EPS for the last 7 years without a break. The quarterly earnings have been on a rise continuously since June 2018.
The revenue has also been increasing over the last 3 years. The stock is about to break the ascending triangle, which is having a Rs. 70 base. It has made several parallel highs in the range of Rs. 397-404. As it is trading near to the lifetime highs and earlier pivots, any close above the multiple resistance points of Rs. 404 will lead to a sharper upmove.
The performance of Marico has been great both on fundamentals, such as ROE (37 per cent), and the EPS strength is at 91. The technical parameters like relative price strength (RS) is 85. The accumulation or a buyer demand ranking is at B and the great sector strength makes the stock attractive. In terms of the technical structure, the price has been in a narrow range between 369 & 404 for the last 10 weeks and is showing signs of a breakout from this range. RSI is rising and coming out of the squeeze and MACD is above the ‘signal’ and the ‘0’ lines, indicating strength to the uptrend.
Buy this stock as strong fundamentals and a favorable price setup auger well for a strong rally towards levels of Rs. 465, followed by Rs. 500
TITAN COMPANY LTD.
CMP : Rs1378.00
TITAN's product portfolio includes jewelry, eyewear, watches, fashion goods, and several other consumer goods. The company has been returning increased EPS on rocketing revenues for the last 3 years in a row. Even on quarterly basis, its EPS has been on a rise since September 2016. Its performance has been great on important fundamentals parameters, such as ROE and EPS strength.
From the technical perspective, the price structure is on the verge of scaling new highs after a 25% correction and also on the verge of a breakout from a 17-week cup and handle like setup. The ensuing rally can be expected to have a more than 25% potential on the upside. The indicators are also bullish. The RSI is rising strongly in the bull zone above 60 and the MACD is rising above its ‘0’ line, with being on the verge of crossing above its signal line on a daily chart. Both, the trend strength and the bullish direction, are strong. The stock is also meeting all CASLIM parameters. The relative price strength is as high as 94 and EPS strength is at 79. Its Return on Equity (RoE) is at 23 per cent and institutional investors have increased their stake in the company by 4.17 per cent in the September quarter. As the price is trading at lifetime highs, it is meeting Minervini’s trend template and Daryl Guppy’s GAMMA rules. We recommend a Buy as the stock has the potential to extend uptrend and reach levels of Rs. 1,526, followed by Rs. 1,675.
AVENUE SUPERMARTS LTD.
CMP : Rs1892
DMart is a supermarket chain by Avenue Super Markets and is promoted by celebrity investor, Mr. Radhakrishnan Damani. DMart stores sell various household products, such as food, house cleaning products, small appliances, general merchandise, and apparels. The brand runs over 180 stores across India, with more focus on mature markets in the west and southern states.
In Q2, company sales grew by 22 per cent YoY to Rs. 5,949 crores and the net profit is up about 48 per cent YoY to Rs. 333.45 crores. The EBITDA margin improved from 7.9 per cent in Q2FY19 to 8.6 per cent in Q2FY20. The RoE is at 16 per cent. With a strong fundamental growth, institutional investors increased the stake by 19.81 per cent.
Technically, after breaking out of the 45 days ascending triangle with a faster retracement, the stock rose by 23 per cent in two weeks. For the past five weeks, the price is moving in a tight range and has consolidated after a big spike. Even in this consolidation period, volumes are registering increment. The RSI entered into a bullish zone. The MACD line is above the zero lines for the past 12 weeks and above the signal line for the past 17 weeks. With the sideways action for the last 17 days, Bollinger Bands is likely to become narrowed on a daily chart. The ADX is above +DI, which above the –DI, showing the strength in the trend. Hence, one should accumulate this stock for a target of Rs. 2,185 followed by Rs. 2,350.
BLUE STAR LTD.
CMP : Rs832.25
Blue Star, the air conditioning and commercial refrigeration company, is operating in India since pre-independence era. The company offers endto- end air conditioning and refrigeration solutions – from manufacturing, contracting, and after-sales services – to its customers. Recently, it also forayed into the residential water purifiers business. The company has also bagged a Rs. 253 worth order from the Mumbai metro, a few months ago.
Technically, the stock closed at a lifetime high. It consolidated for 14 weeks in cup formation and has moved above the 40, 30, and 10 weekly averages. Now, these averages are up trending.
The 14 period RSI in the bullish zone reached 70 levels. The MACD line is above the signal line and zero lines. The MACD histogram is in the green territory and indicating a continuing upside momentum on a weekly chart. The -DI is below +DI and ADX and ADX scaling higher, which indicates the strength of the trend. The stock also meets all the CANSLIM characters. Its relative price strength (RS) is at 91 and the EPS rank is at 87 and shows a good buyer demand and good group rank (10). Its RoE is healthy at 22 per cent. The number of funds investing in this stock has increased to 137, increasing the stake by 2.94 per cent. Enter the stock for a potential move towards levels of Rs. 970 followed by Rs. 1,025.
SBI LIFE INSURANCE CO. LTD.
CMP : Rs969.30
SBI LIFE operates in the life insurance business. The company is now trading at its all-time high. Over the last 7 years, the EPS has grown from 5.56 in FY2012 to 13.27 in FY2019, increasing every single year without a break. Over the last 3-year period from FY2017, the revenue grew at 8.2 per cent, 11.5 per cent and 13.50 per cent, respectively. For the Q2FY2020, SBILIFE delivered one of the best in the industry results. Its RoE is at 18 per cent.
From a technical perspective, it has a great price strength, sector rank, and buyer demand. Institutional investors aggressively bought this stock in the last quarter and increased their stake in the company by 19.90 per cent. This indicates the big investors' accumulation in the stock.
During the week of October 14, 2019, announcement price broke out of a 55-day base and rocketed up 13 per cent in less than 2 weeks, following its results and, thus, reacting to its fundamentals. The stock is trading above all the short and long term moving averages. The RSI is in the super bullish zone on the weekly chart. The MACD, once again, has turned bullish after a brief break. Life insurance is a young industry in India with a promising future, considering the presence of a massive population of eligible uninsured individuals. All technical indicators are strongly bullish, pointing that long positions will be rewarded. Considering the above factors, we recommend to buy this stock for a target of Rs. 1,140, followed by Rs. 1,220.
ICICI LOMBARD GENERAL INSURANCE COMPANY LTD.
CMP : Rs1349.90
ICICIGI operates in the non-life insurance business. The company has done pretty well since its IPO, which took place from September 15 to 19, 2017. It has a growing EPS over the years – from 8 per cent in FY2013 up to 23 per cent in FY2019. The EPS has been rising each year without a break. Also, the EPS has been growing on a quarterly basis since June 2017. The general insurance business is highly cyclical in nature and industry players depend heavily on investment income for their profitability. Despite this, ICICIGI has been consistently returning great performance.
From the technical perspective, all technical indicators are strongly bullish for the stock. It made a 100 per cent rally from its October 2018 low to May 2019 high and, then on, had a 140-day consolidation base, which, it just broke out strongly from. It has also broken out of an ascending triangle with good volumes. The triangle base is approximately Rs. 270. The RSI indicator comes out of the falling wedge pattern, which is a bullish sign in confluence with the price breakout. The MACD line is just above the signal and has given a buy signal on a weekly chart. The stock is also meeting all The CANSLIM parameters. Its relative price strength is as high as 95 and EPS strength is at 82. Institutional investors aggressively bought this stock and increased their stake in the company by 29.29 per cent. The RoE and other parameters are also in line. Buy this stock at current levels as the stock has the potential to move towards Rs. 1,480- 1,550 level.
