july 10, 2015 technical update - stategy...

Research Analyst:Dharmesh Shah Nitin Kunte, CMT Dipesh [email protected] [email protected] [email protected] Mukherjee Vinayak [email protected] [email protected]

Technical Update - Stategy 2015July 10, 2015

Deal Team – At Your ServiceRally on track, time to board…

• The Sensex entered a major bull phase in early 2014 after a breakout from a seven year consolidation since conquering the previous bull cycle peak of 2008.The Sensex entered a major bull phase in early 2014 after a breakout from a seven year consolidation since conquering the previous bull cycle peak of 2008.The correction of nearly 13% since March 2015 life-time highs caught investors off-guard and created doubts about the sustainability of the bull run. This hasbeen provoked by lack of better earnings momentum and the recent upheavals and uncertainties in the global markets

• In this report, we have delved into our earlier prognosis of a structural uptrend on the domestic benchmarks to decipher whether the current correction fitswithin that frame work. The historical data of secondary corrections within the framework of a bull market on the Sensex clearly outlines that corrections tothe tune of 15% from the highs have been a normal phenomenon in the bull market. Post such a correction, the markets have given healthy returns over thenext three to six month horizon

• Outlook: Positive. We reiterate our bullish stance and maintain the target of 35000, 10500 (Sensex, Nifty) for the current up move. We believe the secondarycorrection in force since March 2015 has made the markets healthier by hiving off the overstretched conditions and created room for a further northwardjourney. Therefore, we believe this is an opportune time for investors to position themselves to ride the next up move within the larger uptrend

• Theme: Cyclicals will continue to outperform

• Our bottom up approach based on technical parameters applied across the entire universe of the NSE cash segment suggests cyclicals would continue toOur bottom up approach based on technical parameters applied across the entire universe of the NSE cash segment suggests cyclicals would continue tolead the rally, going forward, while midcap and small cap also are likely to continue their new found glory

• Top sectors: Capital goods, banking, auto and consumer space

Recommendations (Time frame: 6 months)Scrip I-Direct Code CMP Action Target StoplossScrip I Direct Code CMP Action Target StoplossCoal India * COALIN 417 Buy in the range of 412 - 428 525 375Bata India * BATIND 1158 Buy in the range of 1115 - 1155 1490 975Raymond * RAYMON 492 Buy in the range of 468 - 487 630 408Torrent Pharma TORPHA 1292 Buy in the range of 1260 - 1295 1730 1130SKF India SKFBEA 1393 Buy in the range of 1370 - 1400 1820 1240

Source: Bloomberg ICICIdirect com Research All price charts as on July 07 2015

SKF India SKFBEA 1393 Buy in the range of 1370 1400 1820 1240Pitti Laminations * PITLAM 67 Buy in the range of 64 - 68 89 55Dredging Corporation of India DRECOR 400 Buy in the range of 385 - 403 570 330* Recommendations already initiated on i-click to gain

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Source: Bloomberg, ICICIdirect.com Research All price charts as on July 07, 2015

The breakout from the Ascending Triangle pattern comprising the entire seven year consolidation since 2008 till early 2014 has major bullish implications. The

Deal Team – At Your ServiceHeadroom for current bull run to extend to 35000/10500

g g p p g y y j pminimum measuring implication of the price pattern i.e. the width of the triangle’s base (21206 – 7697=13509) added to the breakout point of 21206 projects anupside potential up to 35000 /10500 (Sensex/Nifty) for the current rally over 2015

The entire up move since 2012 has occurred in a rising channel originating from 2009 lows as highlighted in the adjoining yearly chart. Over the past threeyears, the index has respected the upper and lower bands of this long term channel. The past two year’s lows are resting upon the lower band of this channelwhile 2014 high is also placed at the upper band of this channel. The upper band of this channel for 2015 is placed at 35000 levels, making this a likely target

BSE Sensex Monthly Bar Chart BSE Sensex Yearly Candlestick Charty y

Upper band of Rising Channel for 2015 @ 35000Minimum measuring implication of the pattern i.e.

width of the base of Triangle (13061 points) added tothe breakout point of 21206 projects upside potentialtowards 35000 levels for the current rally

2008 high 21206

2010 high 21108

2013 high 21483

Seven year consolidationsince 2008 to 2014occurred in AscendingTriangle pattern

Source: Bloomberg ICICIdirect com Research

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Source: Bloomberg, ICICIdirect.com Research

Deal Team – At Your ServiceCorrections part of bull market; ignore noise and start accumulating…

• We reiterate our bullish stance and maintain the target of 35000, 10500 for the current up move. We believe the secondary correction in force since March 2015g , p yhas made the markets healthier by hiving off the overstretched conditions and created room for a further northward journey. Therefore, we believe this is anopportune time for investors to position themselves to ride the next up move within the larger uptrend

• The historical data of secondary corrections within the framework of a bull market on the Sensex over the past decade reveals that a correction to the tune of15% from the highs is a normal bull market correction. In the past decade, in 10 out of 13 instances, market corrections have been to the tune of 13-15% on anaverage. After concluding the normal correction of 15% the subsequent three month and six month performance has yielded positive returns on all 10occasions. In the present context, the benchmarks appear to have completed the normal course of correction and are at the cusp of resuming the primaryuptrend Therefore we believe this is an opportune time for investors to position themselves to ride the next up move within the larger uptrenduptrend. Therefore, we believe this is an opportune time for investors to position themselves to ride the next up move within the larger uptrend

BSE Sensex Monthly Bar Chart

-13%

Bull market corrections and subsequent returns

3M return 6M return

-10%15%

Year % Fall % %

Mar - May 2005 12 27 43

Oct - Nov 2005 11 31 32

Feb - Mar 2007 16 19 40

Jul - Aug 2007 13 41 28

J J l 2009 15 20 24

-16%

-13%-15%

-12%-11% -15%

-15%Jun-Jul 2009 15 20 24

Oct - Nov 2009 12 7 11

Apr - May 2010 12 13 22

Feb -Jun 2012 15 19 23

Jan -Apr 2013 10 7 17

May Aug 2013 15 19 21


-12%

-11%May -Aug 2013 15 19 21

Average 13 20 26

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The historical seasonality trends play an important role in any given market scenario. In the case of the Sensex there is credible historical evidence, which

Deal Team – At Your ServiceSeasonality factors indicate bottoming out in second quarter

y p y p y g ,suggests that markets form important bottoms in the second quarter of each calendar year while the subsequent three and six month performance has largelyyielded positive returns as is evident from the adjoining tableSince the start of the major bull market of 2003, on 10 out of 12 occasions the Sensex has delivered positive three and six month returns from the bottom madein the second quarter of each year. This clearly highlights the seasonality factor of our domestic markets, which have tended to bottom out in the secondquarter of every calendar year. Therefore, we believe after the recent correction, the benchmarks have made an important bottom in June 2015 (26307/7940)

BSE Sensex Monthly Bar ChartS lit t d R t t 2 d Q t l BSE Sensex Monthly Bar Chart

June 2015

The historical seasonality trends of our market clearlydepicts that markets tend to form important bottoms in thesecond quarter of each calendar year

Seasonality trends: Returns post 2nd Quarter low

Year

2000 3832 7 4

2001 3097 -9 5

2002 3098 3 9

Sensex low in Q2

3M return %

6M return %

May 2010 June 2012

May 20142002 3098 -3 9

2003 2904 53 101

2004 4228 32 56

2005 6141 41 53

2006 8799 42 57

2007 12426 39 63

May 2003

M 2005

June 2006

April 2007

April 2009

2007 12426 39 63

2008 13406 -4 -28

2009 9546 79 83

2010 15960 26 29

2011 17314 -5 -11

2012 15749 19 23


May 2004

May 20052013 18144 7 17

2014 22198 20 24

Average 23 32

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The key observation that points toward changing market dynamics in the current scenario is that the most recent decline during May-June 2015 is smaller in

Deal Team – At Your ServiceChanging market dynamics indicate bulls rejuvenated after breather…

The key observation that points toward changing market dynamics in the current scenario is that the most recent decline during May June 2015 is smaller inmagnitude compared to the preceding March and April 2015 down legs. The May-June fall (28071 to 26307) measured just 1764 points whereas the precedingtwo falling segments in March and April 2015 measured approximately 2700 points. The fall getting smaller in magnitude is the first indication of waningdownward momentum and serves as a precursor ahead of an impending reversal

The up move from the June 2015 low of 26307 has seen the Sensex surpass its last lower peak of May 2015 (28071). This is the second confirmation ofchanging market dynamics as the fall getting smaller and rallies getting bigger in magnitude confirm the resurgence of bulls after a four month hiatus. Theviolation of lower peaks and trough sequence prevalent in the last four months signals a positive turnaround and puts bulls back in a dominating position

BSE Sensex Daily Bar Chart

30024Fall getting smaller is the first signal of waning downwardmomentum. Subsequently the rally becoming larger thanpreceding ones confirms the end of corrective phase andresumption of bullish momentum 29094

Breakout past May 2015 high has alsoconfirmed a Double Bottom formation atMay-June bottom of 26307 levels

2776 points

28071

27248

26423 263072670 points

1764 points


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One of the key tenets of Technical Analysis is that “Market discounts everything” However swayed by prevailing sentiments participants tend to overlook this

Deal Team – At Your ServiceMarket tends to bottom out on negative events…

One of the key tenets of Technical Analysis is that Market discounts everything . However, swayed by prevailing sentiments participants tend to overlook thisdynamic feature of markets. The below chart is aimed at highlighting historical instances where major bottoms in the Sensex coincided with sharp negativesentiments arising out of adverse events/news flows. Taking cues from this market behaviour, we wonder if current negative sentiments led by the Greek crisisand Chinese equity meltdown are already discounted and whether the time is apt to turn bullish as prices have already indicated at changing dynamics

BSE Sensex Monthly Bar Chart

Europe debt crisis

Grexit, China meltdown ??

May 2004Coalition Govt.

October 2008Lehman Brothers Bankruptcy

1996 PokhranNuclear test

1998-1999 Kargil War

September 2001WTC Tower attack


1991 – Iraq war

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Deal Team – At Your ServiceMajor bottom already in place at 26300 / 7900

BSE Sensex Weekly Bar Chart

• Based on the time and price confluence we believe a significant bottomhas been made at the recent low of 26307, 7900. We do not expect themarkets to violate this bottom in the foreseeable future. The markets haveabsorbed a slew of negative events/news flows on the domestic as wellglobal front during this decline. This adds to the significance of the June2015 low around 29300, 7900

BSE Sensex Weekly Bar Chart

30024

• Price wise, the confluence of the following technical parametersconverging near 26300 / 7900 area made this a key support zone for thebenchmarks where value buying outstripped supply and led to animportant bottom formation:

The 38.2% Fibonacci retracement of the 2014-2015 rally (19963 to

26307

y (30024) is placed at 26200, 7900

The normal bull market correction to the magnitude of 14%measured from the March 2015 peak of 30024, 9119 is placed at25820, 7850.

The bullish gap area formed in October 2014 is placed at 26368-

38.2% retracement of 2014-2015rally is placed @ 26200

Bullish Gap formed in October 2014is placed at 26368-26108 levels

December 2014 & May 2015 lowsThe bullish gap area formed in October 2014 is placed at 2636826108 levels

Pictorially, the two distinct bottoms of May and June 2015 placed inthe vicinity of 26300, 8000 region can be termed as a Double Bottompattern. A double bottom formation is a bullish reversal pattern,which highlights strong buying emerging at the earmarked valuearea The resolute breakout past the neck line of the double bottom

placed at 26469, 26423 levelsThe 14% magnitude normal course

of correction from March peak is alsoplaced around 25820 levels

area. The resolute breakout past the neck line of the double bottompattern has further confirmed validity of the 26300, 7900 support area

Source: Spider Software ICICIdirect com Research

19963

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Source: Spider Software ,ICICIdirect.com Research

Deal Team – At Your ServiceTop Picks: Going up the “Bottom up way”…

• After successfully implementing our statistical model of stock selectionduring the 2015 technical strategy report (follow link) we have once againreassessed the universe of the NSE cash segment to capture existing oremerging trends across sectors

• With a 15% correction in the index over the past three months, we havetweaked the statistical model comprising four key parameters to find outtweaked the statistical model comprising four key parameters, to find outa blend of outperformers and stocks that are attractively priced after acorrection while maintaining the structural bull run

• The four major parameters included in the statistical model focus onassessment of price structure, momentum, turnaround in price structureand identification of key value areas for fresh entry levels

Top Picks7

Qualitative check leading filtration

To 51 stocks

• In the first step, we ran the model on the entire gamut of NSE cash stocks(1077 stocks) filtering the stocks that match at least two criteria listedabove

• The number of stocks from the NSE cash universe fulfilling at least two

Sectoral segregation

Filtering process: Elimination based On non compliance of at least

two criteria Outcome: Stocks fulfilling at least

i i (14 k )parameter filtered down the list to 147 stocks. Moving up the ladder, weran through the set of stocks manually to run the qualitative checks interms of liquidity, volumes, etc. that further narrowed down the list to 51stocks. These short-listed 51 stocks represent the blend of positive pricestructure or turnaround and/or momentum, presence of value area

• We restricted ourselves to analysing the bucket of 51 stocks which

two criteria (147 stocks)

Stock Universe – NSE Cash Segment(1077 Stocks)

• We restricted ourselves to analysing the bucket of 51 stocks, whichalready fulfilled major technical parameters. The sectoral segregation ofthese stocks also threw up interesting insights. Sectors with higherrepresentation in the bucket list reflected the inherent strength in thatspace and presented an alternate perspective of identifying theoutperforming sectors

Source: Spider Software ICICIdirect com Research

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Source: Spider Software ,ICICIdirect.com Research

Deal Team – At Your ServiceTop Picks: Taking a bottom up approach…

Sector / Scrip Name Return Matrix (%) Turnaround At Key Price MomentumSector / Scrip Name Return Matrix (%) Turnaround3 month 6 month 12 month Remark

Auto / Auto ancilliary1 Bajaj Auto 27.4 6.3 12.9 √ √2 Maruti Suzuki 9.9 17.5 50.9 √ √3 M & M 6.4 9.1 7.5 √ √4 Asahi India Glass 7.1 29.3 76.6 √ √5 At l A t 18 3 26 2 73 0 √ √

At Key support

Auto and ancilliary space continues to do well.While stocks like Maruti are clear outperformers,we are bullish also on Bajaj Auto, being underf h li li h d M hi d CIE hi h i

Price Structure

Momentum

5 Atul Auto -18.3 -26.2 73.0 √ √6 Bharat Forge -17.0 22.3 62.5 √ √7 Mahindra CIE 11.0 14.7 31.5 √ √8 Munjal Showa -3.3 -10.6 26.8 √ √

BFSI9 Axis Bank 2.7 17.1 50.9 √ √

fresh limelight and Mahindra CIE, which isbreaking out of a basing pattern

While the PSU banking space remains weak andneeds to undergo a base formation, stocks like

10 DCB Bank 16.4 11.5 55.6 √ √11 HDFC Bank 5.0 15.0 26.5 √ √12 Mahindra Finance 6.3 -11.1 5.0 √ √

Capital Goods / Industrials13 A B B 4.3 9.8 24.7 √ √14 Cummins India 6 5 2 1 37 9 √ √

Capital goods space continues to outperform and

needs to undergo a base formation, stocks likeAxis Bank and DCB Bank are favoured within thespace to ride during volatile market conditionsbased on robust price structures

14 Cummins India 6.5 2.1 37.9 √ √15 Ingersoll-Rand -10.3 8.4 41.7 √ √16 Larsen & Toubro 3.3 20.7 4.2 √ √17 Pitti Lamination 5.2 78.5 124.6 √ √18 SKF India -5.6 4.6 26.1 √ √19 Timken India -10.8 13.0 84.6 √ √

remains structurally positive. While frontlinestocks like L&T remain positive, we prefersmaller companies like Pitti Lamination and SKFIndia to capture the volatility

Source: Spider Software Capitaline ICICIdirect com Research

Cement / Infra20 JK Lakshmi Cem. -7.1 -10.0 49.1 √ √21 UltraTech Cem. 7.2 16.2 19.3 √ √22 Simplex Infra -12.5 14.4 4.5 √ √23 Va Tech Wabag -2.9 2.9 9.9 √ √

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Source: Spider Software, Capitaline, ICICIdirect.com Research


Consumer discretionery / stapley p24 Asian Paints -5.0 3.6 33.1 √ √25 Bajaj electrical 18.5 19.6 -24.9 √ √26 Bata India 0.3 -11.0 -14.4 √ √27 Hind. Unilever 2.1 19.7 48.4 √ √28 Kajaria Ceramics -7.1 22.3 30.1 √ √29 Kansai Nerolac 3.6 15.7 39.8 √ √

Consumer space remains resilient and there arefresh bouts of positive momentum in paint stocks amid bearish crude prices. We, however, preferBata as the stock is attractively priced after asignificant corrrection and seen attracting freshbuying interest from value investors30 Pidilite inds. -8.4 2.6 62.5 √ √

31 Somany Ceramics -4.6 30.6 58.3 √ √

IT32 Infosys -9.7 0.6 21.2 √ √33 TCS 3.4 7.6 9.2 √ √

buying interest from value investors

Both heavyweights look attractively priced afterthe decent correction and may see freshmomentum returning over time

Oil&Gas / Energy34 Coal India 16.4 10.5 6.5 √ √35 I O C L 14.0 27.5 22.2 √ √36 Reliance Inds. 23.1 21.5 -1.6 √ √

Ph

While falling crude prices are a boon forupstream OMCs we prefer Coal India on the backof a turnaround in price structure

momentum returning over time

Pharma37 Cadila Health. -3.9 10.2 64.6 √ √38 Ipca Labs. 8.5 -4.4 -20.9 √ √39 Sun Pharma.inds. -24.8 8.7 23.8 √40 Torrent Pharma. 6.2 16.5 89.4 √ √

PSU


PSU41 Bharat Electron -5.9 19.5 54.8 √42 Dredging Corpn. 5.2 2.0 -7.9 √ √

The share price exhibit a sheer outperformanceby BEL while we prefer Dredging Corporation asthe stock is at an early stage of the bull phase

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Source: Spider Software., Capitaline, ICICIdirect.com Research


TextileTextile45 Arvind Ltd 6.6 9.6 17.2 √ √46 Himatsing. Seide 17.4 8.5 19.8 √ √47 Raymond 5.8 -5.1 9.1 √ √ √

Others48 Rallis India 8.7 18.9 14.9 √ √

We prefer Raymond as the stock looks at thecusp of a major turnaround in price structure

49 Tata Chemicals 0.9 4.4 25.5 √ √50 Ent.Network -11.1 40.9 56.3 √ √51 PVR 4.2 0.2 4.9 √ √


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Source: Spider Software., Capitaline, ICICIdirect.com Research

Deal Team – At Your ServiceCoal India (COALIN): Long term rounding breakout…

CMP: | 417 Buying range: | 412-428 Target: | 525 Stop loss: | 375

• Coal India is at the cusp of a major turnaround on the larger degree pricecharts. The entire price action since January 2011 till date represents afour year long Rounding Pattern as highlighted in the adjoining monthlychart

CMP: | 417 Buying range: | 412 428 ge 5 5 S op o 3 5

Monthly Bar Chart

The stock has registered a breakout from the 4 year Rounding

Price Parity with previous major up move at 525

• The stock has registered a resolute breakout above the neck line of therounding pattern in this month’s trade. The rounding formationcomprising almost the entire listing history of the stock signals a changeof guard from a long term trend perspective and heralds a sustainableuptrend, going forward, for the stock, going forward

Neckline of the rounding pattern at 415

g y gconsolidation pattern signaling a structural turnaround

• A look at the price and time wise behaviour over the last year alsoquantifies the bullish turnaround in the stock. The stock witnessed a sharprally between March to June 2014, whereby it posted a faster retracementby completely overhauling its three year decline of 2011 to 2014 in justfour months. Thereafter, the stock retraced just 50% of the four monthsrally from | 241 to | 423 and extended the time wise correction for almost12 months. Larger time wise correction and limited price correction is the

i t it f t t l b ll k t d ll f th t kprimary trait of a structural bull market and augurs well for the stock,going forward

• We believe the stock has all the underpinnings of a structural bull market,going forward. Therefore, it presents a strong case for medium-terminvestment. We expect the current rally to extend towards | 525 over themedium term being the price parity with the previous up move from| 241 to | 423 as projected from the 2015 trough of | 346

240

Long term monthly MACD is in risingtrajectory and supports the uptrend in price

| 241 to | 423 as projected from the 2015 trough of | 346

*Call has been initiated in i-Click to Gain on July 7, 2015 at 11:07 hrs

Source: Bloomberg ICICIdirect com Research Market Capitalisation | 271098 crore Equity capital | 6316 crore

1212

Source: Bloomberg, ICICIdirect.com Research Market Capitalisation | 271098 crore Equity capital | 6316 croreFace value 10 52 week H/L |430.70/ |331.35200 day EMA - | 373 50day EMA - | 396 52 week EMA |370

Deal Team – At Your ServiceBata India (BATIND): Fresh buying opportunity at long term value area…


• The share price of Bata India witnessed a decent price correction over thepast five months. After the correction of nearly 37% from its January 2015life-time high of | 1496 the stock is now poised near the key long termvalue area and provides a good investment opportunity with a favourablereward/risk ratio to ride the larger uptrend

CMP: | 1158 Buying range: | 1115 1155 ge 90 S op o 9 5

Weekly Bar Chart

Base formation at the major support level anda subsequent breakout signals reversal oftrend and stock likely to challenge its

1496

Retest of all time high

• The price correction in the stock halted precisely at the major value areaof | 945 during June 2015. The stock made a swing low of | 942 andformed a bullish Hammer candlestick on the weekly charts indicatingbuying support emerging at lower levels. The confluence of followingtechnical parameters converging at | 945 makes this a strong value area:

The previous major hurdle and breakout area of 2012-13

January highs placed near 1490 levels

The previous major hurdle and breakout area of 2012 13consolidation is placed around | 940

The 61.8% retracement of the major rally of March 2013 –January 2015 (| 687 to | 1496) is placed at | 960

The long term rising 200 week EMA is placed at | 953.Historically, the stock has remained above this average overthe last 25 years barring the exception of 2000 and 2008 687

200 Weeks EMA

• Over the last two months, the stock consolidated between | 1130 and| 945 levels, which highlights accumulation by stronger hands at the keyvalue area. The recent breakout past this two month base formation rangesignals resumption of bullish momentum and provides good entry point

• Based on the aforementioned technical argument, we believe the fivemonth correction off January 2015 high has approached maturity The

RSI has formed a base near the bull market support area of 40 andhas recently generated a bullish crossover thus supports thepositive trend in price

month correction off January 2015 high has approached maturity. Thestock is set to resume its larger uptrend. We expect the stock to remain ina rising trajectory from here on and eventually head to challenge itsJanuary 2015 high of | 1496 over the medium-term



1313

Source: Bloomberg, ICICIdirect.com Research Market Capitalisation | 7380 crore Equity capital | 64 croreFace value 10 52 week H/L |1496 / |942.25200 day EMA - | 1150 50day EMA - |1069 52 week EMA |1153

Deal Team – At Your ServiceRaymond (RAYMON): Change of polarity, stock entering new bull phase …

CMP: | 492 Buying range: | 468-487 Target: | 630.00 Stop loss: | 408.00

• The textile space has been the toast of the Street over the last fewmonths. Investors who lapped up textile stocks were rewardedhandsomely as many stocks produced multi-fold gains and are still goingstrong. Within the space, the share price of Raymond, which hasrelatively remained a laggard, is showing green shoots of a turnaround in

CMP: | 492 Buying range: | 468 487 ge 630 00 S op o 08 00

Monthly Bar Chart

Change of Polarity as previous long termtrend line resistance acting as support andprojects upside towards 630 levels

138.2% retracement 630

579price structure. The sharp recovery off June 2015 lows of | 405 seems tobe a trigger for higher magnitude rally and, therefore, offers anopportunity to ride the same

• The strong upsurge in 2014 has signalled a long term reversal of fortunesfor the price structure of Raymond. The stock has registered a breakoutabove the long term yearly trend line joining the highs of 2006 (| 630) and

485

2013 (| 467) and also formation of rising peak and trough formation onlong term charts

• The corrective decline unfolding since December 2014 high of | 579 sawthe stock testing its long term trend line and a sharp pullback from thesupport level signal a Change of Polarity as the previous trend lineresistance has reversed its role and is acting as support

• The stock is well poised to embark upon its next major up move. Weexpect the stock to head towards | 630 over the medium-term horizon,thus providing a favourable reward/risk set-up to ride the up move in thesecond half of 2015. The 138.2% retracement of the recent decline from| 579 to | 405 is placed at | 630

Th l t thl MACD ill t i i i i t j t f i

175

MACD is in uptrend and is seen taking support at itssignal line thus supports the positive trend in price

• The long term monthly MACD oscillator is in a rising trajectory forminghigher high and has been sustaining in the positive territory above itstrigger line, and is currently seen taking support at its signal line, thussupporting the overall positive trend in price



1414

Source: Bloomberg, ICICIdirect.com Research Market Capitalisation | 3094 crore Equity capital | 61 croreFace value 10 52 week H/L |579.15 / |377.35200 day EMA - | 453 50day EMA - | 455 52 week EMA |448

Deal Team – At Your ServiceTorrent Pharmaceuticals (TORPHA): Resilience in turbulent times…


• The robust long term price structure and a short-term bullish Flag patternon the weekly time interval chart spells continuation of the larger bullphase for the stock amid volatile equity markets. We, believe the stockwill continue its outperformance from medium-term perspective and

CMP: | 1292 Buying range: | 1260 1295 ge 30 S op o 30

Weekly Bar Chart

Share price continues to exhibit resilienceamid volatile market conditions and remainsa key out performer over last quarter.

Price parity @ 1730

remain in rising trajectory

• The following key parameters substantiate the bullish view on the stockover the next few months:

The continuation of rising peak and trough formation on theweekly time interval charts despite turbulent markets over the

We expect current rally to extend towards1730 over next few months

1223

1333

past quarter clearly reflects resilience and underlying strengthin the trend

The stock price is seen breaking out of short-term Bullish flagpattern, which signals continuance of larger up trend and,therefore, offers a fresh entry opportunity

1030

21 week EMA

The rising 21 weeks EMA currently placed at | 1220 hashistorically acted as a strong support during corrections overthe last one year. The most recent correction also anchored atthe said moving average, which coincides with the 61.8%retracement of the preceding rally (| 1030-1333)

• Based on the aforementioned technical arguments, we believe the current

RSI continues to sustain above its bull market supportzone of 50-60 supporting overall bullish outlook

April 2014 low @ 520

gup leg off February 2015 lows of | 1030 would last towards | 1730 as theparity with the preceding major up leg of 2014 (| 520-1223). Therefore, itoffers a favourable reward/risk opportunity over the medium term


1515

Source: Bloomberg, ICICIdirect.com Research Market Capitalisation | 22371 crore Equity capital | 103 croreFace value 5 52 week H/L |1370 / |659.50200 day EMA - | 1102 50day EMA - |1270 52 week EMA |1062

Deal Team – At Your ServiceSKF India (SKFBEA): Base formation at key trend line and 34 weeks EMA…


• The stock seems poised to move out of a seven month consolidation tomark an end of the secondary correction and resumption of the long termup trend, thus offering a decent investment opportunity

Th l i h f SKF I di ll bli h d

CMP: | 1393 Buying range: | 1370 1400 ge 8 0 S op o 0

Weekly Bar Chart

The stock is poised to move out of aseven months consolidation thus offering

Price Parity with previous majorup move at 1820

• The long term price chart of SKF India represents a well establisheduptrend as the stock moves northwards in a rising peaks and troughsmanner while respecting its long term trend line originating way back inJune 2014

• The stock price has formed a strong base at the 34 weeks EMA as can beseen in the adjacent chart, which is currently placed at | 1355 levels

seven months consolidation thus offeringfresh entry opportunity 1514

38.2% retracementat 1310

• While the previous rally between | 1007 and | 1514 was swift and took 18weeks to pan out, the subsequent correction has already taken 22 weekswhile retracing just 38.2% of the previous up move. Such price/timebehaviour is the hallmark of a structural uptrend and augurs well for thelongevity of the up trend, going forward

• The current bullish momentum is expected to pan out over the next

1007

Base formation at the trend linesupport and 38.2% retracement of theprevious up move

34 week EMA• The current bullish momentum is expected to pan out over the next

several months offering a decent opportunity to ride the expecteduptrend. We expect the stock to travel towards | 1820 being the priceparity with the previous up move from | 1007 to | 1514 as projected fromthe recent trough of | 1310

• The weekly RSI is sustaining above the bull market support area of 50 andhas recently generated a trend line breakout of its own Thus it supports

RSI has generated a trend line breakout of itsown thus supports the positive trend in pricehas recently generated a trend line breakout of its own. Thus, it supports

the positive trend in priceown thus supports the positive trend in price


1616

Source: Bloomberg, ICICIdirect.com Research Market Capitalisation | 7801 crore Equity capital | 53 croreFace value 10 52 week H/L |1540 / |1007200 day EMA - | 1320 50day EMA - |1411 52 week EMA |1285

Deal Team – At Your ServicePitti Laminations (PITLAM): Breakout past multi-year highs…


• The stock staged a sharp recovery to vault past its 2012 and 2007 highs of| 47 and | 53, respectively, in January 2015. The entire rally since thesecond half of 2014 displays characteristics of an impulsive behaviour asthe stock completely overhauled its preceding decline of 22 months (May

CMP: | 67 Buying range: | 64 68 ge 89 S op o 55

Monthly Bar Chart

Breakout past multiyear highs backed by strong volume

81

123.6% retracement @ 89

2012-February 2014) in a record 11 months. Such a faster retracementhas larger implication on the long term price structure and heralds astrong uptrend for the stock, going forward

• The behaviour of volumes is testament to the changing dynamics of thelong term price trend in the stock. The entire rally since the second half of2014 has garnered high participation as monthly volumes since June

( )

p y g y gparticipation signals long term shift of trend in favour of the bulls. Measuring implication of the breakout opens upside towards | 89 levels

48 51

2014 (14 lakh shares) have been almost three times the 24 month averagevolume of 5 lakh shares

• We expect the stock to ride the new found momentum into second half of2015 as well and remain on course towards target of | 89. The measuringimplication of the multi-year range breakout, i.e. the magnitude previousseven year range of 2007-2014 (| 07 to | 48 ) projected from the breakout

i t f | 48 id t d | 89 l l l ti f 07point of | 48 opens upsides towards | 89 levels on a larger time frame.This also coincides with the 123.6% retracement of the previous declinefrom | 81 to | 51 projecting upside towards the | 89 region

• The long term monthly MACD oscillator is in an uptrend forming higherhigh and is diverging from its signal line indicating strength in the upmove and supports the overall positive trend in price

Sharp surge in volumes since second half of 2014signals strong investor appetite for the stock

07


Source: Bloomberg Capitaline ICICIdirect com Research Market Capitalisation | 184 crore Equity capital | 13 crore

1717

Source: Bloomberg, Capitaline, ICICIdirect.com Research Market Capitalisation | 184 crore Equity capital | 13 croreFace value 5 52 week H/L |81.80 / |21.13200 day EMA - |50 50day EMA - | 61 52 week EMA |48

Deal Team – At Your ServiceDredging Corporation Of India (DRECOR): Consolidation breakout…

CMP: | 400 Buying range: | 385.00-403 Target: | 570 Stop loss: | 330

• The share price of Dredging witnessed a long term structural turnaroundafter breaking out past the bullish Inverse head & shoulder pattern formedat its life time lows during May 2014. The resolute volume led breakouttriggered a long term trend reversal for the stock

Af h b k ll f |210 |570 i j h h h

CMP: | 400 Buying range: | 385.00 403 ge 5 0 S op o 330

Monthly Bar Chart

The stock is on the cusp of a break past downtrendsloping channel and trigger next leg of rally

784

Monthly Bar Chart

• After the strong breakout rally from |210 to |570 in just three months, thestock entered a corrective phase since June 2014 till date. Currently thestock is at the cusp of a break past the downtrend sloping channel, whichencompasses the entire corrective price action over the last one year.Therefore, it offers a fresh entry opportunity for investors. During thecurrent month, stock price broke above past three month highs signallingfresh upward momentum

784

570

• The corrective decline off May 2014 high of | 570 got anchored at keyvalue area of | 340 levels being the confluence of following:

The 61.8% retracement of the sharp rally of March 2014 –May 2014 (| 210 to | 570) is placed at |348 levels

The previous breakout area and Neckline of the larger bullishInverse head & shoulder pattern placed at |330 levels also

d i l d d f h k

210LSRS

H dreversed its role and acted as support for the stock

• Time wise, the stock has already consumed 13 months in the correctivephase since May 2014 while retracing just 61.8% of the preceding threemonths rally from | 210 to | 570. Extended time wise correction andlimited price correction is the primary attribute of a bullish price structureand signals a longer term up trend

The price action is also supported by decentvolumes which remain above 50-month average

RSI is seen looking up after a steadyb tt i th i i it f 40 50

159Head

• Based on the above technical evidence, we believe the stock has formeda potential higher bottom at | 341 and is set to embark upon a next majorup-leg thereby providing fresh entry opportunity. We expect the currentup move to lead the stock to challenge its 2014 high placed at | 570 levelsover the medium term


bottom in the vicinity of 40-50 range

Market Capitalisation | 1140 crore Equity capital | 28 crore

1818

Source: Bloomberg, ICICIdirect.com Research Market Capitalisation | 1140 crore Equity capital | 28 croreFace value 10 52 week H/L |496 / |341200 day EMA - | 386 50day EMA - |375 52 week EMA |385

Deal Team – At Your ServiceStrategy 2015 Stock Performance

Rec. Month Stock Rec Price Target Stoploss Exit Price % Profit/Loss CommentRec. Month Stock Rec Price Target Stoploss Exit Price % Profit/Loss CommentDec-14 GIC Housing 177 320 144 270 53 Target achievedDec-14 Asahi India glass 112 168 80 168 50 Target achievedDec-14 Alstom India 568 770 455 770 36 Target achievedDec-14 BEL 2724 3650 2235 3650 34 Target achievedDec-14 Federal Mogul Gotze 376 520 295 500 33 Target almost achievedDec-14 BHEL 244 320 195 297 22 Booked profit at 297Dec-14 Ramco Cement 294 420 238 357 21 Booked 50% profit at 357 Dec-14 Nilkamal 462 660 375 660 20 Booked 50% profit at 551 Dec-14 Exide 165 235 135 173 5 Squared off near cost

Source: ICICIdirect com Research

19

Source: ICICIdirect.com Research

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No 7, MIDCAndheri (East)M b i 400 093Mumbai – 400 [email protected]

DisclaimerANALYST CERTIFICATION

We /I, Dharmesh Shah, Dipesh Dagha, Nitin Kunte, Pabitro Mukherjee, Vinayak Parmar Research Analysts, authors and the names subscribed to We /I, Dharmesh Shah, Dipesh Dagha, Nitin Kunte, Pabitro Mukherjee, Vinayak Parmar Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector b k d h i i b idi i d i b i f h i fi lif i l i bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice The report and The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances .This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances The securities discussed and opinions representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason.

DisclaimerICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not

il id t f t f I t d i d t Ri k Di l D t t d t d th i k i t d b f necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment twelve months from the date of this report for services in respect of managing or co managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months.ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any material conflict of i h i f bli i f hi interest at the time of publication of this report.It is confirmed that Dharmesh Shah, Dipesh Dagha, Nitin Kunte, Pabitro Mukherjee, Vinayak Parmar Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses they might have financial interests or beneficial ownership Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

july 10, 2015 technical update - stategy...

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