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TCS 3448.00 (-5.29%)
Tech Mahindra 1470.00 (-7.74%)
Titan Company 2433.25 (2.70%)
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UPL 712.95 (0.03%)
Wipro 580.00 (-9.48%)

Top trading ideas from the Chemical sector

Top trading ideas from the Chemical sector
by 5paisa Research Team 17/11/2021

The chemical sector includes a variety of businesses like Agrochemicals, Pesticides and Fertilizers, Specialty chemicals, etc.

The chemical sector stocks came into the limelight since the beginning of the pandemic. Many stocks have more than doubled from their respectively lower levels and the sector had witnessed nothing less than a fairy tale kind of story.

The chemical sector includes a variety of businesses like Agrochemicals, Pesticides and Fertilizers, Specialty chemicals, etc.

In this article, we shall analyze the performance of the sector leaders from a short to medium-term perspective. We have included United Phosphorous Limited (UPL), SRF Limited and Aarti industries for the analysis for the same.

First, let’s compare the performance of these stocks.

UPL: 63.8% YTD and 0.43% 3-month performance (CMP- 761.65)

SRF: 94.12% YTD and 18.72% 3-month performance (CMP- 2164.80)

Aarti Industries: 59.76% YTD and 3.63% 3-month performance (CMP- 985.15)

We observe that SRF has been the top performer for the medium term as well as for the short term. These chemical stocks were going through the correction phase after hitting their respective all-time high. UPL is down by 11%, SRF is down by 14.2% while Aarti Industries is down 15.2% from its all-time high. Since then, the stocks look for bottoming out and are on a verge of starting their fresh upward journey. Surely, these stocks have a lot to catch up on.

The stocks are trading at value-buy price and one can also think about investing in such high-quality stocks.

On November 17, UPL is currently down by almost 3% and SRF is down by 1.17% while Aarti Industries is up by 2.85%.

UPL and SRF are currently taking support of its 50 and 20-DMA while Aarti industries look to test its short-term resistance of 20-DMA. The RSI of UPL, SRF and Aarti industries is at 56,49, and 51 respectively. Decent volumes have been witnessed in these stocks since a few trading sessions. The stocks look for fresh triggers as they look to continue their upward journey. We do not see any signs of huge downfall and one can expect good returns percentage for the short to medium term. Market participants should closely keep an eye on these stocks as they look to find the momentum.

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Technical analysis: Prince Pipes breaks out from consolidation

Technical analysis: Prince Pipes breaks out from consolidation
by 5paisa Research Team 17/11/2021

Prince Pipes breaks out from a multi-week consolidation. Read on to find out more.  

Prince Pipes & Fittings Limited is a multi polymer manufacturer and provides integrated piping solutions. It came into existence in 1987 and in the initial stages used to only manufacture PVC products. However, it eventually began manufacturing polymer piping solutions, and now mainly manufactures four types of polymers namely CPVC, UPVC, HDPE and PPR. 

In December 2019, Prince Pipes came out with an Initial Public Offering (IPO) and raised Rs 500 crore of which 50% was Offer for Sale (OFS) and 50% was a fresh issue. The offer price was Rs 178 per equity share but failed to provide any listing gains to its investors, as on the listing day, it made a high of 174.3 and closed at 163.5. However, over the period it has had a spectacular journey as the stock is currently trading at 847. 

Having said that, the stock began to rally from June 2020 and finally took a breather in May 2021 after making a high of 790.4. Since then, the stock has been moving into consolidation. In fact, it also made a low of 592.25 in August 2021. However, the stock gave a breakout on weekly charts last week. On lower time frames, the stock did give a pullback and again began to move in a consolidation. The immediate support for the stock is placed at 825.6 and resistance at 866.45 followed by 895.05. 

The Relative Strength Index (RSI) is trading in the overbought zone at 74.47, whereas it is still above its 9-Day Exponential Moving Average (EMA). Moving Average Convergence Divergence (MACD) is showing positive signs as it gave a positive crossover on the breakout in the positive territory. Bollinger band, on the other hand, is showing signs of a possible pullback as the price is currently trading above its upper band. 

At the time of writing, the stock was trading at 848.6 levels. 

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All about Value Funds!

All about Value Funds!
by 5paisa Research Team 17/11/2021

Value funds invest in any stocks by adopting a strategy that has less market value and high intrinsic value.

We live in a world where an individual has various options to park his funds but presently, individuals are in a dilemma where to invest their hard-earned money and receive optimal benefits from the same. Mutual funds offer various schemes where every type of individual can invest his corpus such as equity-oriented schemes, non-equity-oriented funds i.e., debt funds, a combination of both equity and non-equity-oriented funds i.e., hybrid funds as well as solution-oriented funds for long term goals such as retirement and children’s raising expenses. Equity-oriented funds are further divided into 11 sub-categories such as value funds, contra funds, focussed funds, and many more.

We are going to discuss value funds in this article.

Value funds are equity-oriented mutual funds, which invest in the stocks of the company that has ‘value’. What is meant by value? There are various ways in which value is defined. To value the company's stock, various metrics are used like price-to-earnings ratio (P/E ratio), price-to-book ratio (P/B ratio), dividend yield, and free cash flow. So, value funds invest in stocks that score relatively lower in the above ratio. When a fund manager adopts a value investing strategy, he looks for stocks that are undervalued or may trade for less than their intrinsic value. These stocks have the potential to grow in the future. When the intrinsic value of any stock or company is more than its market value it is known as value. Hence, fund managers of value funds search, analyse and then invest in such value companies.

Things to consider before investing:

Risk: As these funds are equity-oriented, they are risky but less than growth funds. These funds are not for the risk-averse investors but for those, who are more suitable for investors that are ready to take risks. These funds face market risk and volatility like any other equity fund. Value funds tend to outperform during bear markets.

Investment horizon: Fund managers invest in stocks that are undervalued and can take some time to deliver returns. So, investors, who are willing to invest for a longer period, should consider investing in these funds. Investors should at least have an investment horizon of five years. This will help investors to receive optimal returns.

Diversification: Fund managers invest in stocks of large-cap as well as mid-cap companies and also, pool a corpus of investors in various sectors, which help investors to reap optimum benefit even if any particular sector is not performing well.

Returns: Fund managers analyse and forecast the performance of the undervalued companies in the market and invest the capital of investors in companies having higher potential. Investors, who want regular investments, should consider investing in these funds. Dividends are paid periodically, depending upon the performance of the fund. These funds offer steady returns over a longer period. Due to the lower cost of these funds, they are quite cheaper than growth funds.

Taxability: As these funds are equity-oriented, they will be taxed accordingly-

Short-term capital gains (STCG): If capital gains arise within 12 months, then they will be taxed as per short-term capital gains at the rate of 15%.

Long-term capital gains (LTCG): If capital gains are arising after 1 year, then they will be exempted up to Rs 1 lakh while above Rs 1 lakh, it will be taxed at the rate of 10% without indexation.

The following table depicts the top five value funds in India based on a one-year return along with their AUM: 

Fund Name  

1-Year Return (%)  

AUM (in crores)  

IDFC Sterling Value Fund  

85.77482  

4,395.72  

Templeton India Value Fund  

75.01647  

645.64  

Nippon India Value Fund  

61.32742  

4,505.66  

ICICI Prudential Value Discovery Fund  

59.36352  

23,219.02  

Aditya Birla Sun Life Pure Value Fund  

59.23967  

4,384.20  

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How to become a Rs 1 trillion company by market cap through IPO? Ask Nykaa!

How to become a Rs 1 trillion company by market cap through IPO? Ask Nykaa!
by 5paisa Research Team 17/11/2021

Investors are embracing P/E levels of 1,710 for this beauty and fashion company.

Nykaa has been a hot topic on Dalal Street since it had a massive debut on the exchanges. Sky has not been the limit for the optimism that investors have shown for this huge IPO listing when it gained about 78% premium over the higher end of the issue price. This has been undoubtedly one of the biggest IPO debuts which has created a lot of buzz, especially among retail investors.

Post-pandemic markets are witnessing a bull rally like never before. The markets have rebounded strongly over last year. As a result, IPOs have come in hoards to reap the benefits of pumped optimism of the investors. One such trending IPO was FSN E-Commerce Ventures Ltd (Nykaa) which received an overwhelming response from investors. The IPO was subscribed 82 times. As a result, the stock had a stellar debut and opened on 10 November at Rs 2,001 on the BSE and Rs 2,018 on the NSE making it a trending company in the markets. The company’s founder and CEO, Falguni Nayar, became the richest self-made female billionaire in India with a net worth of about USD 6.5 billion.

The company announced quarterly results that ended September on 14 November, a few days after its debut. The profitability dipped by 65% on a sequential basis and by nearly 96% when compared to the same quarter last year. Increased marketing costs along with IPO costs had led to poor profits in the quarter.

The price-to-earnings multiple of the company has soared to insane levels of 1710. It would take 1710 years for investors to get back their invested money assuming the current level of earnings. Only the shareholders of the company know how this gap is going to fill with ever-optimistic growth. The stock had a high of Rs 2,409.95 and a low of Rs 1,994.10 in its so far journey.

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Top Trading Ideas: Lux Industries

Top Trading Ideas: Lux Industries
by 5paisa Research Team 17/11/2021

The company recently posted its quarterly numbers which contained double-digit growth on every front.

Lux Industries Limited is engaged in the business of manufacturing and sale of knitwear. Its brands include Lux Cozi, Lux Venus, Lux Karishma, Lux Touch, Lux Bigshot and Lux Classic. The clothing company is a midcap company with a market cap of Rs. 13,848 crore. The company has strong financials and has reported higher than industry revenue growth and net income. Not only that, but the company has also witnessed an increase in market share from 2.36% to 5.12% in the last five years. This certainly shows that the company is on the right track with its business performance and is quite evident with its movement in the stock price.

The stock has performed exceptionally well by delivering awesome returns of 178% YTD. On a YoY basis, the stock has gained 205% and it has also gained 14.53% in three months. This shows that the stock is in no mood to stop its momentum. Lux industries recently posted its quarterly numbers which contained double-digit growth on every front. Strong management commentary regarding their business boosted investors’ confidence.

On Wednesday, the stock has logged a fresh all-time and is currently trading 8.82% up at Rs 4594.

The stock trades well above its key moving averages and RSI is going strong at 85. Huge volumes have been recorded in the last couple of days indicating higher institutional activity. The positive directional movement (+DMI) crossed the -DMI a few trading sessions back and currently it is well above it. It shows strong strength. The above parameters suggest that the stock is in super bullish mode and shows no signs of stopping as it heads into uncharted territory.

Considering the performance Lux Industries has shown, we can expect the stock to continue its momentum on the higher side. Traders can expect some good returns for the short to medium term as the technical analysis validate our point.

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RHI Magnesita India gaining momentum post strong Q2 results

RHI Magnesita India gaining momentum post strong Q2 results
by 5paisa Research Team 17/11/2021

RHI Magnesita India zoomed 5% today with positive results and a capacity expansion plan from the company. 

RHI Magnestia India Ltd is in the business of manufacturing and marketing special refractory products, systems and services to the steel industry in India and Globally. It is a market leader for special refractories in India and has many global customers for its international quality products.

Business model

Revenue Breakup: Presently, the company earns 74% of its revenues from the manufacturing of refractories and 22% from the trading of refractory items.

Dependent Industries: Demand for refractory is primarily dependent on the steel industry, which accounts for 75% of total sales. Refractory products are also used in glass, cement, non-ferrous, petrochemicals industries. 

Manufacturing Facilities: The company has 2 manufacturing facilities located in Bhiwadi, Rajasthan and Tangi, Odisha, Vizag, Andhra for its manufacturing operations.

Today, the parent company has announced to make India a research and development hub, and a manufacturing hub. They have established a new R&D centre in Rajasthan. They have allocated Rs 400 crore to increase the production capacity of its existing plants, planning for brownfield expansion and automation of these facilities.  

Financials

Recent: Two days back, they have reported strong Q2FY22 sales growth of 25%YoY stood at Rs 432 crore beating the estimates, with domestic steel production jumping 18% YoY. This was led by volume growth of 19% and a 6% price hike.

EBITDA grew 33% YoY stood at Rs 66 crore, however as EBITDA margin stood at 15.16% rose 95bps YoY though down 213bps QoQ, with inflationary cost pressures. Net profit grew 34% YoY stood at Rs 43 crore, however, the margin stood at 9.96% rose 60bps YoY.

5-year history: In the last five years from FY16 to FY21, revenue has grown at a CAGR of 24% and profit has grown at a CAGR of 20% which shows the steep growth of the company. The operating margin is consistent and stable in the range of 15% to 20% for the last 5 years.

Brokerage outlook

With capacity expansion (underway) aimed at capturing strong domestic and exports opportunity, Edelweiss estimate RHIM would log CAGRs of 19% in sales and 21% in PAT over FY21-23 with RoCE expansion of 310bps to 26.5%, with a target price of Rs 438 in next 12 months.

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