From red zone to bull zone—the journey of markets over the last few months has been off-the-wall.
Nifty 50 has yielded 40% returns from its March lows. That said, not all stocks are flying. There’s a lot of skepticism among investors pertaining to the strong pullback we have witnessed so far. Some are calling it a liquidity driven rally (which they feel might end soon) while others are justifying the rally pointing at a massive distress selling we witnessed globally in March.
Instead of taking a call on the entire market, investors would be better off if they stick to stock specific action. Because all companies might be going through the same pandemic but the pandemic is affecting each industry differently.
In technical analysis, monthly charts are used to identify the primary trend of a stock using indicators such as moving averages, highs and lows, RSI and Stochastic to name a few.
Our analysis of Nifty 500 stocks threw up some interesting findings. The primary trend of nearly 36 stocks turned bullish in June. We further filtered the list, applying basic fundamental indicators—profit growth, Return on Equity (RoE) and Net Debt to/EBITDA.
Three stocks—Vaibhav Global, Granules and J.K. Cement are noteworthy. All technical indicators have been screamingly positive—stocks have formed higher tops and higher bottoms on monthly charts, and their June closings have been above crucial MMAs—Monthly Moving Averages (10MMA, 30MMA and 60MMA). Moving averages too have been trending upwards.
These companies have generated over 15% RoE on Trailing Twelve Month (TTM) basis. Their bottom line grew over 15% on an average during the last 5 quarters. Also, their balance sheets aren’t highly leveraged.
Vaibhav Global is a Jaipur based vertically-integrated electronic retailing company that sells fashion jewellery and lifestyle products in the US and the UK. It runs shopping TV channels ShopLC (in the US), and The Jewellery Channel, (in the UK). They are supported with two e-tailing platforms—shoplc.com and tjc.co.uk.
Did social distancing norms helped Vaibhav Global clock 17% sales growth in the UK and 9% growth in the US in Q4FY20? Performance of the company in the coming quarters would be interesting to watch. As long as the Company maintains the growth momentum, the stock might remain in focus.
Granules is a Hyderabad headquartered integrated pharmaceutical company. It derives 47% of its revenues from FD (Finished Dosages) business while API (Active Pharmaceutical Ingredients) and PFI (Pharmaceutical Formulation Intermediaries) account for 36% and 17% respectively. The Company recently concluded a buyback at Rs 200—a corporate action that’s usually perceived as a confidence booster.
It remains crucial to see how Granules positions itself at a time when there have been talks of cutting back China dependency in the manufacturing of APIs.
JK Cement is one of India’s major cement producers having a significant market share in the white cement category. In 2019, the company laid down an ambitious expansion plan involving the investment of Rs 1,700 crore. The company reported impressive 18% growth in bottom line in the quarter gone by. Favourable changes in the product mix and falling coal prices aided the Company.
Steady prices and huge pent-up demand have helped cement companies over the last few months. Thus, the stock price action of JK Cement should be viewed on the back of changes in the cement prices and the demand scenario.
Identifying bullish trends on monthly charts isn’t the end of analysis; perhaps that’s just the starting point. As long as stocks stay above important MMAs and higher-top-high-bottom structures remain intact, they continue to catch investors’ attention.
Please Note (read as a disclaimer): None of the stocks discussed in the article is the recommendation to buy, hold or sell. This could just be the starting point for deeper analysis that you might want to carry out on your own. You may also take professional help as you feel appropriate.
You may also like to read: Gaps: technical analysis indicator to power your trade
Disclaimer
We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:
We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflicts of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.
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