FUNDAMENTAL STOCK PICK
ZYDUS WELLNESS LTD.
RECOMMENDATION:
book profit/Avoid new investments/under weight.
About the Company:
After Cadila group acquired Carnation Nutra Analogue Foods from its earlier promoters, Cadila Healthcare demerged its Consumer products business in to CNFL and renamed CNFL to Zydus Wellness.
The company has very popular brands Sugar Free-the low calorie sweetener, Nutralite-the premium table spread and EverYuth-a specialty skin care range.
Sugar free-India’s largest sweetener
Having 78% market share, with a presence in both aspartames as well sucralose categories, Sugar Free enjoys a top of the mind recall in the minds of calorie conscious consumers.
Making a foray in the low calorie beverage market, the division successfully extended the Sugar Free brand name to launch its soft drink Sugar Free D-lite.
Nutralite-butter brand
'Nutralite' India's leading table spread offers several benefits for the health conscious and fitness conscious consumer as it is cholesterol free, has no hydrogenated fats and no trans fats. Low in saturated fats, Nutralite is also enriched with Vitamins A, D and E.
Ever youth-skin care
The specialty range of skin care products are marketed by the division under the umbrella name 'EverYuth'. The brand today enjoys the No.1 position in the scrub and peel-off categories and is the 2nd largest selling face wash brand in India
Having good products and strong customer base why we are under weighting the stock of Zydus Wellness?
First reason valuation is not justified in terms of sales growth and profit growth.
Second reason batter opportunity available at good valuation.
Let’s check the fundamentals of the stock.
Debt-free status: 100% debt-free-good for long term sustainable growth.
P/E multiple 42% vary high and above sales and profit growth rate.
PBV: Price to book value 18 times.
PCF: Price to cash flow 41 times.
Dividend yield just 0.39%.
So over all valuation is high and with no big margin of safety at current market price.
So we are underweighting the stock and recommending clients to book profit or avoid new investments in this stock.
MUTUAL FUND PICK:
Franklin India Blue-chip Fund
Recommendation:
Buy.
Ration: Good for long term conservative investors.
COMMODITY UPDATE:
Those who are regular readers of my week report knows many time I have describe views based on Dow theory and complex theory wave pattern.
Hear in this article I have expressed my view on gold based on Dow theory, wave patter and head and shoulder patter.
First chart is COMEX gold (USA):
We have shown wave structures which is as below,
Wave 1(down) 1226 to 1075.
Wave 2(up) 1075 to 1161.
Wave 3(down) 1161 to 1044.
Wave 4(up) 1044 to 1130.
Wave 5 down?
As per wave structure and calculations target of wave 5 will be 900 to 850.
If you see the wave structure which shows lower tops and lower bottoms.
Now to continue with this pattern gold needs to go below 1044.
Three consecutive and weekly closes below 1044 will confirm the down wave pattern.
Second chart is MCX gold:
Look at the chart which is forming higher tops and higher bottoms.
Now last higher bottom is 15950, now to break this higher tops and higher bottom formation gold needs to go and sustain below 15950, but our gold price is largely dependence on COMEX we will filter price by 3% and will confirm the bearish trend below 15450.
Along with this gold is forming large head and shoulder pattern of 4400 points.
Confirming head shoulder will come by two ways once comex gold gives three consecutive close below 1044 and mcx gold close below 15450 my target will be 12500.
US DOLLAR INDEX
From 75 levels I am bullish on us dollar index and now has crossed 81 mark.
I have attached chart which shows wave pattern.
Wave 1(up) 72.23 to 78.45
Wave 2(down) 78.45 to 76.60
Wave 3(up) 78.60 to 81.34
Wave 4(down) 81.34 to 79.51
Wave 5 up start above 81.34
Now if you mark this is forming higher tops and higher bottom ,now to start 5th wave of up dollar needs to close 3 consecutive close above 81.34 then as per wave calculation my target 85.
If dollar get strong up to my target levels then I expect vertical fall across the commodities/gold/silver/metals.
GLOBAL MARKET
I have attached chart of S&P 500 of America.
Look at the chart index is forming higher tops and higher bottoms with this see it is forming 5 wave pattern.
If index close 3 consecutive days and weekly above 1178 then as per wave count my target is 1333 and 1397.
As per time series from low of 675 this is 13 month so this can change the trend but if it conclude the bullish condition then we will see another 4 month rally in US market and above target.
WEEKLY MARKET OUTLOOK
Support at 5238/5180/5130
Resistance at 53010/5351/5387
Market is rising with lots of liquidity pumping By Fiis and domestic’s institutions (many time told in my fundamental analysis)
After constant rise from budget we are still below last high of 17800 and 5300 (cash market) respectively sensex and nifty ,yes we have not broken the lower bottom of 15300 and 4500 for nifty but we need to cross and substation above 17800 and 5300 with vary good volume.
If the above condition happens then we have given Elliott wave analysis of “common flat a-b-c” pattern and which will take sensex to 19300/19600 and in last leg it will cross 21000 mark also.
But we need to sustain above 17800 for quite some time say for 4 consecutive weeks, last time after Dubai fall sensex has taken out the 17500 levels but it sustain above 17500 for 2 weeks and panic start so this time we need to close above 17500 for at least 4 week thereafter we will see the next up move from hear.
In technical analysis every penny counts, still after such a rise we have not cross the high and in my last report I have argued about “head and shoulder” pattern and if we are not able to cross the high 17800 and 5300 then problem is their and doors for down side should be cautioned.
The rules of the game (stock market) is to be in direction of major trend and get out when the trend has reached the stage where almost everyone has become complacent and careless.
MOMENTUM CALLS
Market is at high speed and if you don’t wear helmet while you running bike at 100 speeds your life is at risk.
Hear we suggest you some trading calls but we also suggest you to buy April month put options to hedge you buying position because market is running on high speed and any single bed news will create vertical fall and you may loose significantly.
TATA MOTORS
Buy with stop loss 725 targets 770/782.
EVEREST KANTO
Buy with stop loss 115 targets 130/145.
IFCI
Buy above 53 stop loss 47 target 64.
GE SHIPPING
Buy with stop loss 290 target 308/318.
GVK POWER
Buy with stop loss 41 targets 49.
NMDC
Buy with stop loss 282 target 310/325.
QUOTE OF THE WEEK:
“I am comfortable if we double our money in three years”
-Warren Buffett.
