A Brief review of Manappuram Finance of its Fundamentals and Technicals.
Retail investors taking money out of Equity mutual funds. Not a surprise, as it was expected when the markets bounce back from lows. Sad part is that, they came with big dreams, stayed invested for 3 years, moving out with loss. Unfortunate that, their impatience is letting them participate in the next very big move that our market will have in the coming years.
Stop loss values for Mutual Funds tracked and recommended by us.
Pharma funds have reached 15% lock in profits. Trend is likely to continue for few more weeks. Value funds are leading with good returns now due to the big drop that facilitated them to pick best bargains. When value funds perform, they give very big returns.
Use stop losses for all your positions, it helps protect your profits as well as your capital.
RBI policy kept rates unchanged, market was a little jittery with expectations that, there can be negative surprise. As nothing changed, interest rates kept at 5.15. It was joy for the markets which moved up for the 4th straight day after the budget day fall.
After a steep drop, getting to big rally is creating confusion in the minds of traders.
Nifty Daily chart
When there is a big drop and steep recovery, it brings confusion. Histogram on the chart has a deep bottom & now price has moved above the EMA. Price says market is bullish, indicator says there is strength on the bear side. And the chart is trending bearish (red lines on the top – indicate bearish trend)
This confusion should lead the markets to go nowhere. For few days it will hover around the range, find resistance at 12292 levels reached on 24th Jan. From here, going long will be a trade that has very less steam left in it. For a short we need price to close below the EMA, which again will be a trade that is half way through.
So, no trades for few days in Nifty. Even Bank Nifty is the same. If both indices are in confused state, in a market that is having strong bullish strength, where can a trade come through.
In a market that has made a good rally, best trades can come from the shorts. One can find stocks that are showing weakness at the top and short them.
Reliance, Hindalco & VEDL have potential shorts –
All three charts having similar pattern. Price is in the zone between 2 EMA’s. Histogram has good depth & chart is trending bearish. Also all 3 have reached value zone( area between both EMA) in 3 to 4 days from their bottom.
Within 5 day’s from the peak or bottom is considered to be hot and more likely to reach back to the bottom.
These are for intra day trades.
Coming to trades for the next day, that is Friday 07-02-2020.
Balakrishna Ind – Stock is getting weak at the top, can have a short trade once the daily histogram ticks down. There was a false break out yesterday, which also adds to bearish strength.
Havells, is getting closer to its weekly value zone. A tick down on the daily will give a short signal. Target can be at 576.
Mindtree had a high rejected & ready for short below 898.
Bajaj Finance stock crossed ₹ 4000 on 26th Sept 2019. This stock has been the darling of stock markets for quite some time, what is so big about it crossing ₹4000 per share.
It was a remembrance to me as I bought this stock way back in 2015 for 4K. Now, the same stock after 1:1 bonus and 1 to 5 split has again crossed 4000. This means, the ₹4000 investment in Bajaj Finace in Jan 2015 is today worth ₹40,000. Yes it is ₹40,000, growth 1000% in about 4 years.
At a time when NBFC’s are getting masacred by the markets following thier poor handling for their businesses, followed by a crunch in support from banks which crippled their businesses. Most of the NBFC’s failed because of their exposure to real estate through builders funding as well as their own greed to acquire real estate assets using short term funds.
Bajaj Finance’s business is more focused on consumer lending. Bajaj Finance did not see a slowdown in it’s business. Even when economic slowdown was much talked about and felt in the economy, this company has been growing at 40%. Their NPA’s are at 0.75%. In a period where there is no funding available for other NBFC’s, Bajaj has been getting overseas funding at a fairly cheap cost. Along with this it has been mobilising large corpus through the Corporate FD markets.
It is growing its fund base alogn with business growth. Where can the stock go from here. Currently Bajaj Fiannce is trading at 60 times its earnings. That means, for every rupee of earnings that the company is generating, market is paying ₹60. It is too pricey, that is the price quality and consistency commands. Bajaj Finance’s latest earnings is at 72 per share and is grown at 42% in the June 2019 quarter. In the last 12 quarters it has an average of 21.55% growth on its TTM earnings. There was a dip in earnings when the company gave bonus shares.
In general market condition when a company gives bonus shares, its capital gets bigger and from there on because it has to service a higher capital, growth slows down. In the case of Bajaj, it slowed down only for 4 quarters, inspite of having 1:1 bonus, which increased the capital to double of what it had earlier. Growth momentum continued at a robust pace. This in itself was a very big achievement because getting back to 30% growth rates just after 1 year from bonus means very robust business growth.
Coming to future prospects, if the company grows at 21% & has a PE of 60, the stoock price will be 7800. Even at a 25% lesser valuation which the stock mostly has after the annoucnement of every quarterly results, the stock price should be at 3750.
Is it good to buy now? Absolutely not. Bajaj Finance stock is very highly priced. With today’s earnings Bajaj finance is attractive only if the price comes down to 2550, which is not a possibility when markets go bullish.
One can have this stock in mind to take entry when there is a crash in the market and price gets to a level it trades at less that 50% of current valuation.
On dividend yeild, this stock is a poor performer, it gives out very less as dividend which is a good move for companies that grow at a faster pace. Berkshire Hathway, one of the world’s highest priced stock, never has given bonus or dividend. Thier philosophy is that, instead of you investing the dividend and growing it, which normally is less than what I grow the company. I will retain the earnings and help you have the best growth for your money.
For those who have already invested in Bajaj Finance, it is one of the goldmine stocks, which can be held for some more years, till it shows signs of weakness in its growth.
Surprise Tax cut on corporates turns the market from Bear to Bull. Yet, this rally will face challenges to sustain. This is India’s biggest reform in the decade which changed the Global view on the way of doing business in India. With the approx. amount of 1.45 Lakh Crores moving from Government to the corporate sector, we may see much better use of this money in the hands of the corporates. Now is the time to wait and see who will benefit from this exchange and how will this transform the Indian economy!