Community User It will all depend on when and how we get over the threat of Covid 19 and minimize the damage on world economy. If things does not come in control we can easily see another world recession looming large. But as a long term investor all these are good opportunity to buy quality stocks SIP way. You can either go via MF or invest in stocks directly.
ICICIdirect Research Our technical research analysts are of the view that the Equity benchmarks witnessed a roller coaster ride amid extreme elevated volatility as the Nifty sharply recovered (~1600 points) from the early session s panic low on Friday to end the week at 9955, down 9% or 1034 points. Broader markets relatively underperformed as the Nifty midcap, small-cap lost 11%, 13%, respectively. Sectorally, all major indices ended in the red with a minimum loss of 7%.
> The weekly price action resembles a small real bodied candle along with the long lower shadow, highlighting the biggest intraday dramatic recovery (~17%) since October 2008 as buying demand emerged from 161.8% external retracement of major up move since 2018 (10005 - 12430) at 8555. As a result, the index held crucial support of 9952 (on a closing basis) that recorded in March 2018
> After Monday s gap down action led by weak global cues, we expect index to trade in the broad range of 10000-8900 amid elevated volatility, which will help index to form a higher base over next few weeks. However, we believe the immediate support for the week is placed around 8900 as it is 80% retracement Friday s sharp recovery (8555 - 10159), placed at 8876
> Structurally, the index has witnessed six major corrections exceeding 25% each over the past two decades. In four out of six occasions, the index bottomed out post ~30% decline. In the current scenario, as the index has already corrected over 30%, supportive efforts emerged near key support of 8500. Although volatility will remain elevated over the next few weeks, historical precedence clearly indicates that investing after 30% correction has offered minimum 30% returns over the next one year period. Thus, investors should accumulate quality stocks in a staggered manner
> Nifty has corrected for more than 30% in the last three months and has witnessed a sharp rebound on Friday.
> Historically there have been six instances, in the last 2 decades, of correction more than 25%. Out of these in four instances correction was to the tune of ~30%.
> In all the four instances one year and two year forward returns for Nifty have been positive and in three instances the returns have been minimum 30% and 50% respectively.
Corona Virus - a buying opportunity ??
> As of March 13th, there are approximately 135000+ confirmed cases of corona virus with 4990 deaths. While China is the epicenter of the virus, there have been 55000+ confirmed cases outside of China in 127 different countries.
> As a point of comparison, the SARS (severe acute respiratory syndrome) outbreak in 2003 lasted about 9 months, from November 2002 to July 2003, resulted in 349 deaths with cases spanning 29 countries. It is pertinent to note that SARS virus had an impact of ~50 bps on Chinese GDP in 2003 and therefore, extended presence of the Corona fears may have some impact on the global growth.
> Corona virus scare has grown multifold post its spread across the key economic zone of Europe and US. Of course, while the numbers of affected cases in India, currently, are not significant, we believe that the pre-emptive geographical lockdown is likely to keep the overall numbers within a limit. Nonetheless, the outbreak of the corona virus will definitely have an overall impact on global as well as Indian GDP growth in the interim. Both trade as well as discretionary spends (travel, leisure etc.) are likely to take a hit in near term as public movement will be restricted given the fear over the same. The recent market correction is result of the same.
> However, historically, it has been seen that market recovery in such case is usually sharp and quick and precedes the economic growth rebound. Therefore, we see the current correction as a buying opportunities for the investors who should utilise the declines to lap up the good businesses which have comfortable leverage, strong return ratios and enjoy leadership position. The allocation, however, can either be made in staggered or in lump sum, depending on investor’s risk appetite.
ICICIdirect Research Going ahead, the bias would remain corrective as long as the index maintains lower high-low formation. Hence, to pause the ongoing corrective decline, the index need to decisively close above previous sessions high, which will open pullback options. We believe index has strong support in the range of 11300-11100 as it is the confluence of:
> 61.8% retracement of last major up move (10637-12430) at 11322
> long term upward sloping trend line at 11000
> price parity of May-August decline (12103 - 10637), projected from January high (12430) is placed around 11000
The immediate trend of the NIFTY is down with support placed around 11,100 - 11,000 levels. Given, the global cues we suggest you wait and watch.
Community User I would suggest one should start putting in money in steps. Currently the price is at 61.8% fibs retracement as suggested by icicidirect team. This level (11135) also happens to be a significant support & resistance line. So ideally one should allocate some money at this level. On weekly basis, 10000 level is extremely significant in the sense that nifty had made double bottom at this level. So next stop to add money should be at that level. Then of course you have 8900 where you can add more. If 8900 breaks, then I guess we all would be praying.
PS: I would not suggest investment in stocks. One would do well to restrict to Nifty ETF
Community User While once you mention that the support level is 11100-11000 Whether any bounce back is expected from these levels. Market chartists say after a bounce back , if it comes on Monday-Tuesday, NIFTY is poised to test 10600
ICICIdirect Research @PARMINDER SINGH CHAWLA - Our technical research analysts are of the view that the weekly price action formed the longest bear candle since June 2009, signifying extended correction on the breach of intermediate support of 11600, contrary to our view
> Going ahead, we believe global cues will continue to set the direction and are expected to remain highly volatile. Hence, wait for stability to emerge before taking any aggressive positions. We expect supportive efforts to emerge at the key value area of 11100 - 10900 region. This is 100 weeks EMA, at 11055 (as on last three occasions that is December 2016, October 2018 and August 2019 buying demand emerged from 100 weeks EMA) and 80% retracement of August-January rally (10637 - 12430), at 10995 coincided with price parity of June-August fall (12103 - 10637) and projected from January high of 12430, at 10965
> Past two week s ~9% decline hauled the daily stochastic oscillator to the oversold territory (at 8), indicating possibility of an impending pullback cannot be ruled out. However, the index needs to post a higher high higher low on a sustained basis to indicate a round of meaningful pullback to retest breakdown area of 11700-11600 (as per change of polarity concept recent breakdown from budget session low would now act as resistance) coincided with 38.2% retracement of current corrective leg 12246 – 11175), placed at 11585
> In the coming session, Nifty futures need to hold Friday s panic low (11116) to keep pullback option open, else extended correction. Hence, the pullback towards 11280-11300 should be used to create short position for a target of 11230
Community User Second half of today, Monday s trading answered your doubt. Volatility is inherent from +500 to -350 in 45 minutes and a recovery from the low to -100 before market closed.
Community User Sensex of BSE was what I was referring to in above answer.
Community User I believe that the global market is over reacting. Do not see any reason to panic even though we have not been able to contain the spread of the Covid 19 Virus. Should see a vaccine or medicines made available against it soon. Another fact that is heartening is that in majority of the cases the infection is mild and more than 95% patients are recovering fully without any side effects. So all these market dips can be seen as good opportunity to buy or average into quality stocks with medium to long term perspective.
Community User Elasticity of demand and demand supply gap determine much of market movements and FIIs over kill the sentiment prevailing.
Community User FIIs are not investing in Indian market for giving it support, the only reason they are here is to make money. For consistent growth we will have to minimize the dependence on them and generate funds internally. With imports from China getting impacted this is another opportunity when we can look for alternatives and give fillip to raw material and goods getting generated domestically to give the much needed boost that our economy desperately require at this juncture.
Community User YES YES AND YES. No news channel ever tell you to buy now. They only tell you to buy when there is a bull run. If you are a serious investor, this is a good time to choose your stock and put in small money. Buy as and when price falls. Absolutely good time to buy but buy staggered
Community User It’s better to wait, rather than buying we dont know the edge of impact due to corona virus
ICICIdirect Research Technical view on ITC: Our research analysts are of the view that the short-term trend of the stock is down with immediate support placed at 200 levels and resistance is placed at 215 levels. We do not suggest fresh entry into the stock.
Fundamental view on ITC: Our research analysts have a BUY rating on the stock with a target price of Rs. 270 from a 12 months perspective.
Losing market share impacting cigarette volumes
Cigarette volumes continued to see muted volume growth of 2-3% growth vs. ~10% volume growth of VST Industries. ITC is losing market share as contribution of smaller size cigarettes is increasing and VST Industries & Godfrey are gaining volumes at expense of ITC. FMCG revenues have grown at a slower pace at 6.1% (excluding lifestyle retailing business), largely impacted by rural growth, which was impacted by trade channel liquidity crunch. The company has expanded its operating margins by 230 bps to 7.7% in FMCG business. With ITC‘s strong and wide distribution network at 6 million outlets, we believe FMCG sector would stand to gain as it enters into newer categories with different product offerings. Hotels business witnessed strong revenue & EBIT growth of 22.2% & 40.1%, respectively, on the back of stronger occupancy, high room rates & robust F&B sales
Tax hike in cigarettes in Union Budget to have limited impact
In Budget 2020-2021, national calamity contingency duty (NCCD) on cigarettes has increased by |0.40- |0.50 per stick. We believe the increase in tax would warrant a price hike to the tune of 4-8%. We feel the company would get the opportunity to take price hikes, which was absent from the revenue growth of the last two years. We believe such a price hike may push back volume revival for the company.
Valuation & Outlook
The company has significantly improved its FMCG EBITDA margins from 5% in 9MFY19 to 6.8% in 9MFY20 driven by better traction of foods business. We expect FMCG segment to continue its upward margin trend and reach double digit levels by FY21E end. We value FMCG segment at 4x FY22E numbers. With increasing scale and better margins, the FMCG segment can be valued at 7-8x price to sales similar to other FMCG peers. With other businesses (agri, paper & hotels being valued at 2-5x FY22E sales) & | 15,000 cash and investments in the books, the cigarette business is available at a relatively cheap valuation of 8-10x EV/EBITDA, which provides significant room for upside for the company.
Community User 2nd best FMCG stock after HUL. Cigarette prices increased by 10 to 12% this quarter. Let us wait and watch the effect it takes.
Community User Technically ITC is a strict no no. Last time it made massive gap down sometime in 2017, it never recovered. Again it had a big gap down recently. I would suggest not to buy this
Community User They had the foresight of the increased awareness against tobacco use and the inevitable effect on sales, thus ITC had been proactive in diversifying into other fields which will stand them in good stead.
Community User For the short term - ITC is not a stock to buy. For the long term yes. Again it depends if you wish to enter itc for the first time. The problem with this company is the sentiment factor, and Government need to do something and hence slap tax on tobacco. Hence this company gets hit by this. However, as a long term investor this is a good buy at the current rate. I will recommend put money in small quantities as the possibility it falling is still there. Another unfortunate thing is the major revenue comes from cigarattes.
Community User With brands such as Aashirvaad, Bingo, and Sunfeast, ITC is the leader in the branded wheat-flour market and a dominant player in cookies. ITC is India s second-largest company in segments such as noodles, deodorants and incense sticks. It has also the India s second-largest hotel chain. Should do good in future as its non-cigarette businesses flourish by leaps and bounds.
ICICIdirect Research Technical view on Oil & Natural Gas Corporation Limited: Our research analysts are of the view that the short to the medium-term trend of the stock is down with support placed at 90 levels. If the stock closes below 90 levels, then further downside can be seen towards 75 levels on the lower side. Higher side resistance placed at 125 levels.
Community User Govt has squeezed this company totally. There is nothing left in this counter. I would not be surprised if this goes back to pre Raha era of 20-30 rupees
Community User For long term investors all these economic slowdown are an opportunity to accumulate slowly. Once the scare of Coronavirus subsides things would be back in track globally though it will definitely take some time for a turnaround and to see an increase in demand.
Community User According to me, you will never get a company of this size and magnitude at less than INR 100. This is as simple as this. Remember the face value of the share is 5. To me investing in this company is like putting in FD. Look for dividends. In another 5 years time, your cost will come down to less than 25 due to dividends paid and in case the mv of share increase it is a bonus. Defenetely recommend. But do not for a moment think the mv of the share will spike like a Reliance. No way. Government cash cow is this company. When there is a deficit ask these companies to pay out dividends.
Community User Due to economic slowdown crude offtake is trending down. Yesterday s Putin support for an output cut with the OPEC countries must buoy up crude price above 60 USD again. That should help ONGC past 120 when market sentiment reverses after today s announcement by Pfizer about a possible Corona virus treatment in the near term.
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