Indian markets on Friday (July 30, 2021) ended the session flat with a negative bias with Nifty ending at levels below 15800 points at 15,763. Now while Nifty has struggled for quite a long time to hit and breach 16,000 levels and as per leading brokerage house ICICI Direct the current consolidation may propel Nifty to levels of 16,300 after forming a base level at 15,450.
So as the momentum looks bullish and markets as they may overcome current range bound move, here are 2 stock picks by ICICI Direct for reaping gains in the short term.
1. Tech Mahindra:
While making the recommendation, the IT company traded at a price of Rs. 1216 and the target suggested by the brokerage is Rs. 1385. Further the brokerage suggest to place a stop loss of Rs. 1090. From the recommended levels, the upside or the returns for the investor shall be to the tune of 14%. Note
Tech Mahindra is a USD 5.1 billion company offering and capitalizing on advanced technologies such as 5G, Blockchain, Cybersecurity, Artificial Intelligence, and more, to enable end-to-end digital transformation for global customers.
Despite outperformance of the IT sector as a whole, within the IT large cap space, Tech Mahindra has underperformed and the brokerage firm backed by heavy research expects Tech Mahindra to soon catch up pace.
The scrip has moved out of 6 months healthy consolidation that suggests of an upward move and
acceleration of momentum. We expect the stock to head towards Rs. 1385 as it is an equal to November-December rally (Rs. 780- 1082) as measured from recent breakout level of Rs. 1082. The stock has immediate support around Rs. 1090 as it is 80% retracement of recent up move (Rs. 1048-1237). Among oscillators, MACD is in rising trajectory, thus validating positive bias in the stock, added the brokerage firm.
Positives for Tech Mahindra as cited by the brokerage include:
1)The company holds a leadership position in communication vertical, which will make it a key beneficiary of vendor consolidation in the segment, 2) key beneficiary of opportunities in 5G, 3) in enterprise segment the company will be a beneficiary of digital acceleration, 4) improving deal wins, healthy deal pipeline & healthy traction in large deals and 5) consistent cash flow and healthy dividend payout
"We believe its leadership in communication vertical will make it a key beneficiary of vendor consolidation in the segment. It would also benefit from 5G opportunities. The enterprise segment will also benefit from improved digital traction, success in large deals. Hence, we remain positive on the stock", added the brokerage.
Financials: For the Q1Fy22 period, the firm's PAT has improved sequentially by 25% to Rs. 1353 crore. Consolidated revenues have also increased on a QoQ basis to Rs. 10,198 crore. Also for the reported quarter, Tech Mahindra raked in deal wins worth $815 million.
|Market cap||Rs. 1,19,241 cr|
|Total debt||Rs. 1661.8 cr|
|Cash and investment||Rs. 12497.1 crore|
|Equity capital||437 cr|
|Face value||Rs. 5|
|Target price||Rs. 1385|
|Last traded price||Rs. 1209.55|
2. Steel Authority of India:
For the Steel major, the ICICI Direct is bullish and sees an upside of 13% i.e Rs. 149 from the recommended price level of Rs. 132. Stop loss suggested for the scrip is Rs. 118.
About SAIL: The Maharatna company is a leading steel producer in India. SAIL is into producing iron and steel at five integrated plants and three special steel plants, located principally in the eastern and central regions of India. Its proximity to its source of raw materials location serves as a major advantage.
Technicals: ICICI Direct is of the view that after a breather of 2.5 months, the stock of SAIL is resolving out of healthy base formation thereby, offering fresh entry opportunity. The stock price took almost 3 months to retrace just 38% of its preceding seven week's rally (April-May 2021) indicating robust price structure, elevated buying demand. Now the consolidation has established into a triangular continuance pattern.
The stock may in coming months challenge life highs of Rs. 151.Among oscillators RSI has generated cross over above nine period average suggesting further positive momentum, added the brokerage.
Key Triggers for the scrip of SAIL
-Captive supply of iron ore aids in keeping SAIL's overall raw material costs under check.
- The relatively firm trend in steel prices augurs well for SAIL
- During Q4FY21, SAIL logged perationally steady set of numbers. For Q4FY21, SAIL's sales volume was at 4.35 million tonne (MT), up 16% YoY. For the quarter, standalone operations reported topline of Rs. 23286 crore which was up 44% YoY & 17% QoQ. Standalone EBITDA for the quarter stood at Rs. 6153 crore up 21% QoQ, while the EBITDA/tonne for the quarter under review stood at Rs. 14145/tonne, as compared to EBITDA/tonne of Rs.12089/tonne in Q3FY21. The ensuing standalone PAT for Q4FY21 stood at Rs. 3444 crore
• Net debt has been lowered by Rs. 16100 crore in FY21.
What should investors do?
ICICI Direct has suggested a buy on the scrip of SAIL for a target price of Rs. 149 and further advised investors to book 50% profits in the stock at 140.80 (Return 7%) and trail stop loss for remaining position to 131.50.
|Market cap||Rs. 56,343 cr|
|Total debt||Rs. 35,576 crore|
|Cash and investment||Rs. 680 crore|
|Equity capital||4131 crore|
|Face value||Rs. 10|
|Target price||Rs. 149|
|Last traded price||Rs. 142.05 ( price at recommendation- Rs. 132)|
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