Is there comfort in the market even at these levels or are a lot of people shying away now and watching from the sideline?
My clients and all the investors who are associated with us are under confident right now as the markets have been shooting up and this is the time to be very cautious. Nifty has been moving in the 13,750-13,850 range where profit booking is very much expected. The market is looking overstretched right now and both technically and fundamentally correction is required.
At this point of time, short-term traders must lighten up their positions and the bifurcation between short-term and long-term positions would be made very clear. One can hold large cap and midcap companies for long term but as the liquidity is high and the economy is getting strong, and before the Budget is announced on 1st of February, buying on decline should start for the long-term position. A correction of not more than 300 and 400 points is expected in Nifty. So, on the lower side 13,400 and 13,300 will be the levels to watch closely.
Cement stocks are doing very well. Your first pick is Orient Cement. Why do you like that stock and what kind of money can be made over the short term as well as on the long term?
This is a Birla Group company which has a huge capacity of 8 MTPA. The main market for the company is widely spread in Maharashtra, Telangana, Andhra Pradesh, Karnataka, Madhya Pradesh and Chhattisgarh, Tamil Nadu, Kerala and Gujarat. Birla one is the band name for the cement distribution of the company. Mutual fund houses hold about 21% stake in the company. Big bull Mr Jhunjhunwala also holds around 1% in the company. FPI is holding about 3% stake while LIC and National Insurance are holding 2-2% stake each. In Q2, the company performed very well. Operating profit increased by 109% and speaking technically, we are getting good price breakout in the stock. Investors must accumulate at the current market price and at declines keeping stop loss of Rs 75 and the target price at Rs 110 for a horizon of three months.
Cadila Health is your second pick. I would want your opinion on that one but before that a quick word on Divi’s and the API space.
Divi’s had performed well and the stock has done really great. We have been bullish on the API theme for a long time and this sector is in focus right now due to the Covid vaccine situation. I believe the stocks like Divi’s Labs will do much better in the coming days.
What kind of prospects do you see in Cadila Health?
According to our study, after the small correction in the market which is very much expected, positive movements will be seen in the pharma sector as defensive buying will be done in that segment. The Covid vaccine from Cadila Health is at the third stage of trial and the prime minister in his announcement said that they are making a DNA-based vaccine and Iexpect a vaccine from Cadila to reach the market in the coming one or two months.
Performance wise, the company is doing really good work in reducing debt and has been making a healthy dividend payout of around 23.34%. The first half of FY2021 has been great for the company and technically also the stock is looking strong. Investors can accumulate this stock at current levels and on declines keeping a stop loss of Rs 455 with target price of Rs 525 to 530 in the coming three months.
The third stock you like is a global agri-chemical major — Bayer Crop Science. What kind of money potential does it hold for investors?
The company is largely famous for its agrochemical business which primarily includes sales and distribution of insecticides, fungicides, herbicides and various other agrochemical products and corn seeds. This company is almost debt-free and has been delivering a healthy dividend payout of around 20.85%. In September, the stock corrected from Rs 6,600 to Rs 5,000. From those levels, the stock has been forming a good base and all moving averages and technical charts have met at one point which shows the stock has a good potential for upside. Investors can make their position in the stock from the current levels with a stop loss of Rs 5,150 for the target price of Rs 5,750-6,000 in the coming three to four months.
