The benchmark index Nifty has marked a fresh all time high in Wednesday’s trading session. The Nifty Midcap 100 has outperformed the frontline indices as it has gained over 1.5%. The Nifty Smallcap 100 has marked the fresh all time high of 11626.60 and thereafter witnessed profit booking. The advance-decline ratio was in the favour of advancers.

Here are the top trading set-ups to watch out for Thursday.

Federal Bank: After registering the high of Rs 92.50, the stock has witnessed consolidation. During the consolidation, the stock has formed a symmetrical triangle pattern on the weekly chart. On Wednesday, the stock has given a symmetrical triangle pattern breakout on the weekly chart. Further, on breakout day the volume was expanded by nearly 4 times of 50-days average volume, which indicates important buying interest. The 50-days average volume was 1.42 crore while today the stock has registered a total volume of 5.41 crore. In addition, the stock has formed a sizeable bullish candle. Currently, the stock is trading above its short and long-term moving averages.

Daryl Guppy’s multiple moving averages is suggesting a bullish strength in the stock. On the daily chart, the 14-period RSI has surged above the 70 mark and it is in rising mode. The RSI has also surged above its prior swing high. The daily MACD stays bullish as it is trading above its MACD line and the signal line. The MACD histogram is suggesting a pickup in upside momentum. On the daily timeframe, ADX is below the 25 mark and suggests that the trend is yet to be developed. Directional indicators continue in the ‘buy’ mode as +DI continues above –DI. Going ahead, as per the measure rule of symmetrical triangle pattern, the first target is placed at Rs 105, followed by Rs 113 level. While on the downside, the 8-day EMA is likely to act as strong support for the stock.

Godfrey Phillips India: On September 29, 2021, the stock has given 79-weeks consolidation breakout along with strong volume. Thereafter the stock has gained over 23% in just four trading sessions. After this sharp upside, the stock has witnessed a minor throwback. During the same period, the volume activity was not significant. Hence, it should be viewed as a routine decline after a robust move. The throwback is halted near the 38.2% Fibonacci retracement level of its prior upward move and it coincides with the 8-day EMA level. The stock has formed a strong base near the support zone and today it has bounced sharply, which indicates that upmove has been resumed. On Wednesday, the stock has formed a sizeable bullish candle along with above 50-days average volume.

An interesting observation is witnessed on the daily RSI. In the recent throwback phase, the RSI never breached its 60 mark, which indicates that the stock is in a super bullish range as per RSI range shift rules. The daily stochastic has also taken support near the 20 mark and it has given positive crossover. The technical evidence indicates a strong upside in the next couple of trading sessions. The prior high of Rs 1368 will act as minor resistance for the stock. While on the downside, the zone of Rs 1270-1230 is likely to provide the cushion in case of any immediate decline.

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Will the Indian market bulls showcase a six in six performance similar to what Yuvraj Singh had done against England in T20 World Cup?

On Wednesday, Indian benchmark indices continued their northward journey for the fifth straight day. The bulls’ fairy tale is likely to continue on D-Street for the sixth straight day as well on Thursday as SGX Nifty is indicating a cheerful opening. The SGX Nifty is trading up by 84 points or 0.46% at the 18,264 level. Meanwhile, commanding attention today would be the IT stocks. Their momentum was derailed after IT bellwether TCS failed to meet the street’s expectations. However, on Wednesday, IT stock reversed its falling trend and considering Infosys and Wipro ADR witnessed a buoyant close, the momentum is likely to reignite in the IT index.  

Cues from Asian markets: A mixed trend was seen in the Asian markets with Japan’s Nikkei gaining 0.99%, while China’s Shanghai Composite was seen trading down by 0.18%.

Overnight cues from US markets: Overnight at Wall Street, major indices closed in green. The tech-heavy Nasdaq jumped 0.73% and the S&P 500 index rose 0.31, while the Dow closed almost unchanged. Finally, it seems the cat is out of the bag as the latest Fed meeting minutes showed the central bank’s tapering could begin gradual tapering prices by mid-November. Meanwhile, on the economic data front, the consumer price index rose 5.4% YoY in September and it was up by 0.4% MoM basis. On the earning front, JP Morgan was in the limelight as the banking giant beat Wall Street’s expectations.   

Last session summary: We often hear this phrase that the sky is the limit, and the current situation on D-Street is quite apt to describe this phrase. The Indian benchmark indices continued their winning streak for the fifth straight day and there is no stopping to the bulls of D-Street. Benchmark indices ended at a fresh record high with the Nifty adding 0.94%, while Sensex rose by 0.75%. A divergent trend was seen in the broader markets with Nifty Midcap 100 gaining 1.54%, on other hand, Nifty Smallcap 100 closed with a modest loss. 

FII’s and DII’s activity on Wednesday: The DIIs continue to be the net sellers for the fourth straight day as they sold to the tune of Rs 431.72 crore, on other hand, FIIs were the net buyers for the first time during this week to the tune of Rs 937.31 crore.

Important events to watch out for: On the earning front, HCL Technologies will be in focus. Meanwhile, WPI Inflation for September would be released on Thursday.

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The markets are trading at fresh all-time highs with IT sector stocks participating in the rally on Thursday. Tech Mahindra from the Sensex pack is the top-performing IT stocks, up by 3%. L&T is the top BSE Sensex gainer up by 3%.

Tata Steel, SBI, Infosys, Power Grid, HDFC Bank and ITC are some of the top-performing BSE Sensex stocks that are trading with gains of more than 1% each.

Indusind Bank is the top BSE Sensex loser, down by more than 1%. Mindtree and IRCTC are the top BSE Midcap index gainers on Thursday. The Midcap index is seen outperforming the BSE Sensex on an intraday basis in Thursday's trading session. Mindtree posted better than expected results and is seen trading higher by 8%.

The BSE Smallcap index is also seen outperforming BSE Sensex on Thursday. BSE Realty index, BSE Metal index, BSE Capital Goods index and the IT index are seen outperforming the frontline indices on October 14, 2021.

IB Real Estate, Godrej Properties and DLF are the top trending realty stocks and helping the Realty index build on its gains.

BSE PSU index is also seen outperforming the frontline indices with IRCTC leading the way followed by NLC India and Hindustan Copper.

On a day where the Indian stock market is seen trading with new highs, several penny stocks are trending and outperforming the markets on Thursday.

Following is the list of penny stocks that are locked in the Upper Circuit on Thursday:

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Mutual funds deliver tax-efficient returns to their investors and all of these mutual fund schemes are taxed differently.

Mutual funds are known as one of the tax-efficient investment instruments as compared to bank fixed deposits. Fixed deposit interest is taxed as per the income slab rates, which is even worse for higher income tax brackets.

Mutual funds offer various types of schemes such as equity-oriented schemes, debt-oriented schemes, hybrid schemes, and solution-oriented schemes among others. All of these schemes deliver different returns based on their risk meter.

The equity-oriented mutual fund schemes have high risk, debt-oriented mutual funds have low risk and hybrid schemes have moderate risk as they are a combination of both equity and debt. These schemes are further divided into various categories. As per SEBI, the equity-oriented scheme is divided into 10 categories, the debt-oriented scheme is divided into 16 categories and hybrid schemes are divided into 6 categories.

All of these schemes are taxed differently. Let’s look at how different categories of mutual funds are taxed:

1. Equity-oriented schemes:

• Short term Capital Gains (STCG): The capital gains arising within 12 months or one year are known as Short Term Capital Gains. These capital gains are taxed at the rate of 15%.

• Long Term Capital Gains (LTCG): The capital gains arising after 12 months or one year are known as Long Term Capital Gains. The capital gains are exempted up to Rs 1,00,000 and if capital gains exceed the amount Rs 1,00,000 then they will be taxable at the rate of 10% without indexation.

2. Debt-oriented schemes:

• Short Term Capital Gains (STCG): The capital gains arising within 36 months or three years are known as Short Term Capital Gains. These capital gains are taxed as per the income tax slab rate of the individual.

• Long Term Capital Gains (LTCG): The capital gains arising after 36 months or 3 years are known as Long term Capital Gains. These capital gains are taxed at the rate of 20% with the benefit of indexation.

3. Hybrid Schemes: The hybrid funds are taxed a little different as compared to other mutual fund schemes as they are a combination of equity as well as debt. The taxation of hybrid funds is dependent on the exposure of equity in the scheme. If the equity exposure exceeds 65%, then it will be an equity-oriented hybrid scheme and if exposure of equity does not exceed 65%, then it will be a debt-oriented hybrid scheme. The equity-oriented hybrid scheme will be taxed the same as any other equity-oriented scheme. Similarly, a debt-oriented scheme will be taxed the same as any other debt-oriented mutual fund scheme as mentioned above in the article.

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Mindtree Ltd continues to bask in the glory of its stellar performance in the July-September quarter that saw the mid-tier software services company beat street estimates while churning out double-digit sequential growth in both profit and revenue.

The company reported a net profit of Rs 398.9 crore for the quarter ended September 30, up 16.2% on a sequential basis and 57.2% on a year-on-year basis. Its revenue shot up to Rs 2,586.2 crore, recording a growth of 12.9% over Q1 and 34.3 % over the same quarter last year.

Mindtree also marginally improved its operating margins, both sequentially and year-on-year, to 20.5% despite aggressive investments to expand its domain capabilities as well as its geographical presence.

The stock has been on fire, and is currently trading almost four times above its 52-week low while its market valuation topped $10 billion (Rs 76,000 crore). On Thursday morning, the stock jumped as much as 11% to almost Rs 4,799 apiece, before cooling off. The company had declared results after market hours on Wednesday.

The company’s investors are enjoying a good run but analysts now suggest they relook at their strategy by pruning their stake to re-enter the stock when it corrects.

Several brokerage houses have assigned a target price ranging from Rs 3,500-4,500, even after a few revised upwards their numbers. This factors in the heady rise in the stock price exceeding the positive overperformance in terms of financial numbers.

UBS, for instance, has a “sell” rating on the stock and has a target price of Rs 3,550. Goldman Sachs, too, maintains a “sell” rating due to high rich valuations. It has a target price of Rs 3,784 for Mindtree.

Other key details:

1) Number of active clients have declined year on year to 263 as of September 30, 2021, but this is not necessarily a bad thing as it seems the firm has cut back on clients with contracts below $1 million.

2) The number of contracts worth $20 million or more remained same at 10. The firm added five clients in the $10-million-plus contract value and added three clients with contract value of $5-10 million last quarter.

3) North America still accounts for bulk of the business but the dependence has declined with revenue from the region declining to 72.8% from 77% earlier. The UK and Ireland have seen an upside.

4) The company derived close to half of its business from communications, media and technology industry vertical, followed by BFSI segment.

5) Attrition levels have risen to 17.7% on a trailing 12-month basis from under 14% even as overall headcount has increased to 29,732.

6) The board of directors declared an interim dividend of Rs 10 per equity share.

Management Commentary:

Debashis Chatterjee, chief executive officer and managing director at Mindtree, said the company’s revenue in the second quarter was $350.1 million, up 12.7% sequentially and 34.1% year-over-year. This was its highest YoY growth for a quarter in a decade.

Chatterjee said the company maintained its EBITDA margin at 20.5% while making aggressive investments in further expanding its domain, digital and leadership capabilities, geographic footprint, and hyperscaler partnerships.

“The broad-based momentum and growth outlook across all verticals, service lines and geographies attest to our operational rigor and sharp focus on being a trusted business transformation partner to our clients,” he said.

“We are well-positioned to capitalize on the strong demand environment and deliver profitable, industry-leading growth in FY22,” he added.

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