Stay with largecaps in the short term: HDFC Securities

Nifty has been trading in the narrow range of 11,564-11,787 on closing basis for last one month. The Nifty has been taking support around 11,550 and the same should be kept as a stop loss in long positions.

Any close above 11800 would result in a breakout from the consolidation and in that case, we can expect Nifty to rally towards 12,000 and 12,430.

The Nifty has recently violated 20-day EMA support of 11,637. And, now a close below 11,550, which has been the lower level of the recent consolidation in Nifty, would be considered bearish trend reversal for the short-term.

Nifty is placed above medium to long-term moving averages of 20, 50, 100 and 200 days. The gap between 50-DMA and 200-DMA has been widening gradually, which indicates that bullish momentum is intact for medium to long term.

Oscillators are showing weakness in the trend but unless price support is broken, short term trend would be considered bullish in Nifty. To conclude, Nifty is holding positional up trend but fallen into the short term consolidation.

A close above 11,800 would result in a breakout and dive below 11,550 would result in a bearish trend reversal. The Midcap and Smallcap stocks are going weak and therefore it would be advisable to stick to the largecaps with strict stop losses, as far as short-term trading in concerned.

Here are three stocks that could give 7-11 percent return in the next month:

UltraTech Cement: Buy| LTP: Rs 4519| Target Rs 5,000| Stop loss: Rs 4,200| Return: 11 percent

Recently, the stock registered a new all-time high above Rs 4,600. It formed a bullish golden crossover on the charts that indicates a long-term trend reversal.

The stock has broken out from the long consolidation which was held on for the last nine quarters. The company has also posted nice quarterly results.

Considering the technical evidence discussed above, we recommend buying the stock at CMP and average it around Rs 4,400, for the target of Rs 5,000, and keep a stop loss at Rs 4,200 on a closing basis.

ITC: Buy| LTP: Rs 307| Target: Rs 330| Stop loss: Rs 295| Return: 7.5 percent

The stock witnessed a bullish golden crossover on the charts, where 50-DMA surpassed 200-DMA on the upside, indicating a long-term bullish trend reversal.

From the FMCG space, ITC looks the strongest stock for the short-term. The stock price has surpassed the crucial resistance level of Rs 300 after a long time.

Considering the technical evidence discussed above, we recommend buying the stock at CMP and average it at 300, for the target of Rs 330, and keep a closing stop loss at Rs 295.

ONGC: Buy| LTP: Rs 170| Target: Rs 185| Stop loss: Rs 160| Return: 9 percent

The stock price has broken out from the consolidation range of Rs 155-160. It has been sustaining above its 200-DMA. The short-term moving averages have been trading above long term moving averages.

Indicators and oscillators have been showing strength on the daily and weekly charts. Long term trend line breakout is seen on the weekly charts.

Considering the technical evidence discussed above, we recommend buying the stock between CMP and Rs 165 for the target of Rs 185 and keep a stop loss at Rs 160 on a closing basis.

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HDFC shares dip as brokerages remain positive, but cut earnings estimates

Housing Development Finance Corporation (HDFC) shares declined more than 1 percent in the morning on January 30 as brokerages remained positive on the stock but cut earnings estimates after third-quarter earnings

The stock was quoting at Rs 1,899, down Rs 19.80, or 1.03 percent on the BSE at 09:57 hours IST.

While maintaining buy call on the stock with a price target at Rs 2,360 apiece, CLSA said it has maintained stock among its top picks in the financial sector but lowered earnings estimates a bit to factor in a tad weaker topline.

The housing finance major has been gaining retail share but is cautious on corporate loans.

Credit Suisse also slashed its FY19 EPS estimates by 2 percent due to slower loan growth and fee income, though it retained outperform rating with a price target at Rs 2,150.

The research house said Q3 results were largely in line with estimates as HDFC remained better placed and has managed to maintain spreads.

Asset quality continued to see some pressure but individual NPAs are stable, it added.

HDFC's third-quarter profit fell 14 percent sequentially and 63 percent YoY to Rs 2,114 crore due to a high base.

Net interest income growth came in at a robust 26 percent YoY (versus 15 percent AUM growth), driven by (a) stable spreads, (b) higher assignment income in the quarter and (c) lower leverage due to capital raise and warrant conversion.

The company scaled back on the corporate lending business, while the retail lending business was largely unaffected. AUM grew 3 percent QoQ/15 percent YoY, driven by a growth of 18 percent YoY in retail lending and 8 percent YoY (slowest in past three years) in corporate lending.

Its provision for expected credit losses stood at Rs 116 crore for the quarter ended December 2018, narrowing compared to Rs 401.30 crore reported in September quarter and Rs 1,765 crore in the same period last year.

Asset quality slightly weakened in the quarter gone by as gross non-performing assets were higher at 1.22 percent against 1.13 percent at the end of September quarter.

Reported spreads and margins were largely stable at 2.3 percent and 3.2 percent, respectively. Interestingly, the calculated cost of funds remained unchanged on a sequentially at 8.35 percent.

While maintaining buy call on the stock with a target at Rs 2,300, Motilal Oswal said HDFC's retail loan growth is impressive, despite intense competition and a high base. The next few quarters would be even better, given easing competition due to liquidity issues, it added.

Over the past nine months, HDFC has hiked its home loan rate by 60-70bp, resulting in improved profitability versus the past two years.

While corporate loan growth has slowed down, the research house believes it is only cyclical and should revert to normal soon.

Japanese brokerage firm Nomura said overall results were mixed and valuations at 15.5x September 2020 book look reasonable.

The research house maintained buy call on the stock with a target at Rs 2,000 but corporate banks (private banks) are higher in its pecking order.

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Source: Moneycontrol