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THE

WEEK GONE BY
Nifty Scales New High,
GDP Growth Moderates to 4.5%,
and RIL Hits Rs 10 Lakh Crore in Market Cap.

" Don't get emotionally involved with your stocks.


Follow a set of buying and selling rules,
and don't let your emotions change your mind."

- William J. O’Neil

www.williamoneilindia.com
INDIAN MARKET OVERVIEW
Nifty made new highs (12,158.8) during the week and ended with a weekly gain of 1.2%. The
gain was mainly aided by accumulation in Banking (+2.7%) and Metal (+4.1%) indices. Even
though Nifty is near its all-time high, the distribution day count is higher. Nifty added two distribu-
tion days during the week. One distribution day, which was observed in the last week of October,
expired on Thursday. So, the current distribution day count stands at four.

Though maintaining a positive view of the general market, we are taking note of the higher
number of distribution days. Nifty is less than a percent above its 21-DMA. If the 21-DMA is
breached and the distribution day count remains elevated, we may downgrade market status to
an Uptrend Under Pressure. If the rally sustains, look for the stocks that had pulled back in price on
low volume. If those stocks rebound from their moving averages when the market starts making
higher highs, then they can do well.

India CNX Nifty 50


D3 D1 D2 Nov 13
D4
D1
D2 D3

100 DMA D1 Nov 8


50 DMA D2 Nov 13
200 DMA D3 Nov 26
21 DMA D4 Nov 29
Follow Through Day, Sept 20.

21-DMA 11,959
50-DMA 11,638
100-DMA 11,412
200-DMA 11,437

We will have an interest rate decision next week (December 5), which will be closely monitored by
the investing community. Over the last 11 months, the central bank has been on a rate-cutting
spree, reducing the rate from 6.5% to 5.15%, a cut of 135bps. Q2 FY20 GDP came in at 4.5%, in
line with consensus. Retail inflation is now at a 16-month high of 4.62%, which is well above the
RBI’s target rate of 4%. Against the backdrop of slowing economic growth and upward trending
CPI, it will be crucial to watch how MPC will make a balance.

2
DOMESTIC DEVELOPMENTS:
Q2 FY20 GDP came in at 4.5%. It is in line with consensus. In October, eight core industries
grew at -5.8% m/m versus -5.2% m/m.

Changes in BSE Indices:

UltraTech Cement, Titan, and Nestle India will be added to the Sensex in place of Tata Motors, Yes
Bank, Vedanta, and Tata Motors DVR. UPL and Dabur India will replace Indiabulls Housing
Finance and Yes Bank, respectively, on the S&P BSE Sensex 50. The changes will be effective
from Monday, December 23.

Growth Down, But There Won't Be Any Recession

In the ongoing Parliament session, Finance Minister Nirmala Sitharaman said that growth has
moderated, but there won't be any recession. She added that the government has already taken a
series of steps to ensure stable growth.

Reliance Industry Market Cap Hits Rs 10 Lakh Crore

RIL became the first company among listed entities to hit a market capitalization of Rs 10 lakh
crore on November 28.

Ujjivan Small Finance Bank IPO to open from December 2

Ujjivan Small Finance Bank plans to raise Rs 750 crore through the IPO, which will open on
December 2. The price band has been fixed in the range of Rs 36–37 per share. Bids can be made
for a minimum of 400 equity shares. The issue closes on December 4.

BSE to Sell 4% Stake in CDSL

BSE will sell a 4% stake in Central Depository Services Limited (CDSL) through OFS. BSE holds
24% in the company. The exchange will sell 41,80,000 equity shares.

SBI Cards IPO

SBI Cards and Payment Services has filed a draft red herring prospectus with SEBI. SBI and Car-
lyle will sell equity shares through this IPO. State Bank of India currently holds a 74% stake in the
company. The company plans to raise Rs 8,000–9,500 crore through the public issue. If the IPO
comes in FY20, this could be the biggest one for the financial year. According to the RBI, SBI cards
is the second-largest credit card issuer in India (18% market share).

Credit Access Grameen to acquire ~76% stake in Madura Micro Finance

The acquisition of the Chennai-based microfinance company will cost Rs 666 crore to Credit
Access Grameen. The company also added that it plans to raise its holding to 100% in a two-step
process for a sum of Rs 876 crore. The business acquired from Madura will continue to operate as
a separate division until its complete integration. Madura had a gross loan portfolio of Rs 2,053
crore, 11.1 lakh borrowers, and 430 branches at the end of Q2 FY20.

3
Government Gets Rs 729 crore by Reducing 10% stake in RITES

The government trimmed its stake in RITES by 10% through an offer-for-sale (OFS). The floor
price for the OFS was set at Rs 293.5 a share.

Tata Motors DVR and three other stocks to move out of F&O from February series

Dish TV, NBCC, Tata Motors DVR, and Castrol to move out of the F&O after the January series. The
total number of stocks in the F&O segment will reduce to 142 from the February series.

TVS MOTOR launched ET-Fi (Ecothrust fuel injection) technology TVS Jupiter

TVS MOTOR launched the new BS-VI TVS Jupiter, equipped with ET-Fi (Ecothrust fuel injection)
technology. TVS Motors has developed two versions of BS-VI Fi platforms, namely, RT-Fi (Race
Tuned Fuel injection) and ET-Fi (Ecothrust Fuel injection).

IDBI Asset Management sold to Muthoot Finance

IDBI Bank has agreed to sell its entire 66.67% of shares in its subsidiary IDBI Asset Management Ltd
to Muthoot Finance. IDBI Bank will receive ~Rs 140 crore from the sale of the AMC business.

Spicejet signed a codeshare agreement with Emirates

Spicejet signed a codeshare agreement with Emirates. It will allow passengers of Emirates to access
the SpiceJet network, while SpiceJet passengers traveling from India to Dubai can take the benefit of
Emirates’ expansive network, opening up multiple international connections for them.

Heat Map

4
GLOBAL DEVELOPMENTS:
Europe

Germany’s manufacturing PMI for November, released last Friday, was 90bps ahead of expecta-
tions at 43.8. However, services PMI fell 70bps short of expectations at 51.3.

The eurozone’s manufacturing PMI for November exceeded expectations by 20bps at 46.4, while
the services PMI missed expectations of 52.5 by 100bps.

In the U.K., manufacturing PMI missed expectations of 48.8 by a margin of 50bps and services
PMI fell short of the expected 50.1 by 150bps.

Germany’s IFO business climate index for November came in at 95.0, in line with expectations.

Switzerland’s GDP grew 1.1% y/y in Q3, beating expectations.

US

The S&P 500 and Nasdaq continue to push into higher highs, trending along near-term support at
the 10-DMA. Nine of 11 sectors and 75% of S&P 500 stocks are trading above their respective
50-DMA.

President Trump signed a bill that supports pro-democracy protesters in Hong Kong. Previously,
Trump expressed reservations about the legislation because it could complicate U.S.-China trade
talks.

The U.S. flash services sector purchasing managers index in November inched higher to 51.6 from
50.6 in October. The manufacturing index rose to 52.2 in November from 51.3 in October.

U.S. trade deficit fell 6% to $66.5B versus expectations of $70.3B. In November, the consumer
confidence index fell to 125.5 from 126.1 in October, below consensus of 128.2.

Asia

China’s industrial profits recorded its steepest decline in eight years in October at -9.9% versus
-5.3% in September.

South Korea and Japan have agreed to hold senior-level trade talks in December to discuss Japan's
export restrictions at the center of a bitter dispute between the two countries, the South Korean
trade ministry said on Friday.

The Bank of Korea left its key interest rate unchanged. The central bank said growth would be
about 2% for 2019 and slightly above that in 2020. Previously, it had forecast growth of 2.2% for
2019 and 2.5% for 2020.

Hong Kong’s October trade balance narrowed 31% y/y to HKD 30.6B due to an 11.5% y/y decline
in imports.

5
STOCK OF INTEREST - LUX INDUSTRIES:
CMP: 1,355.90 (As on November 29, 2019 EOD)
Lux Industries is the leading innerwear company that accounts for 14–15% market share in the
organized men's innerwear market. The company manufactures more than 100 products across
15 brands. It offers innerwear for men, women, and kids; winter wear; socks; and slacks for
women in varied colors and designs. The company has a manufacturing capacity of 20 crore
garment pieces a year across its six manufacturing facilities.

O’Neil Methodology and Technical Viewpoint:

The stock broke out from a stage-one flat base in the first week of November on a weekly chart.
We added it to our watchlist but are waiting for the stock to cross supply zone of Rs 1,400–1,425
on above-average volume.

The stock is looking strong on O’Neil technical parameters with price strength rating of 87, price
strength line trending upward, and buyer demand rating of A.

The EPS Rank of 94 reflects a strong earnings profile. Also, the number of funds holding the stock
increased 8% q/q in Q2 FY20.

40 WMA
Supply Zone

10 WMA
Strong fundamental & technical rating Stage-1 Flat base

Buy Range 1,425 - 1,468

Recent Quarter Performance:

For Q2 FY20, revenue increased 28% y/y to Rs 355 crore. EBITDA grew 27% y/y to Rs 54 crore,
while PAT was up 95% y/y to Rs 41 crore.

EBITDA margin at 15.3% remains unchanged y/y for Q2 FY20. The company has ROE higher than
24% consistently for the last four years. PAT grew at a CAGR of 31% in the last seven years.

Key Growth Drivers

A shift in product mix toward the premium brand, phase-II expansion to double the production
capacity over the next 3–4 years, strong brand presence and marketing strategy, and target of Rs
5,000 crore revenue by 2025 can improve top-line growth, improve profitability, and drive the
stock price.

6
Research Team:
Mayuresh Joshi, mayuresh.joshi@williamoneilindia.com
Kongari Rajashekar, kongari.rajashekar@williamoneilindia.com
Rushit Sejpal, rushit.sejpal@williamoneilindia.com
Satya Narayan Panda, satya.panda@williamoneilindia.com
Soumya Mohanty, soumya.mohanty@williamoneilindia.comt

Disclaimer: William O Neil India Investment Adviser division, is one of the divisions of William O Neil India
Private Limited, which is a company incorporated under the Companies Act 1956. William O Neil India Invest-
ment Adviser division is a registered investment advisor with the Securities and Exchange Board of India and
through its online product, MarketSmith India intends to provide quality equity research material and information
to its customers. The investments discussed or recommended through MarketSmith India may not be suitable
for all investors and hence, you must rely on your own examination and judgement of the stock and company
before making investment decisions. Data provided through MarketSmith India is for information purposes only
and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Information and
discussions made available through MarketSmith India contain forward looking statements that involve risks,
uncertainties and assumptions that could cause actual results to differ materially from those contemplated by
the relevant forward-looking statement. William O'Neil India Investment Adviser division or its employees /
directors or any of its affiliates are not responsible for any losses that may arise to any person who has made
investments based on the contents of this document. Past performance never guarantees future results.

Analyst Disclosures: No part of his or her or their compensation was, is, or will be directly or indirectly related to
the specific recommendations or views expressed in this research report.

Disclosure of Interest Statement Companies where there is interest

Analyst ownership of the stock No

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