What do you make of Nifty at 18,000? Is it facing some resistance? Also, what are your ultra HNI clients telling you about the mood to take profits?
Nifty is resisting the 18,000 mark but before that, 17950 is kind of a strong hurdle for Nifty. Unless we cross that level on a closing basis, I do not think 18,000 will be achievable but definitely as the market movements and global indications are showing, as soon as the earning season starts, definitely the market will outshine from this point of time.
HNIs are really worried that the market has been trading at such high levels. So profit booking has been taking place in the counters which are looking overbought. We are also buying on declines on the stocks which are fundamentally good.
A lot of activities are taking place in chemical names. It has something to do with power shortages in China and generally the prices are heading higher. Let us talk about GSFC valuation metrics. You seem to be favouring this company. Why do you like it and what is the target?
Yes, this is a very interesting story. GSFC is principally engaged in production of fertilisers and chemicals. The company is the world’s second largest ammonia producer. The company has reported highest ever cash flow from operating activities — around Rs 1,780 crore and has utilised these proceeds to repay its debt. Its borrowing was reduced from around Rs 1,560 crore to just Rs 35 crore. The company’s cash conversion cycle has been reduced from 105 days in FY2020 to 60 days in FY2021.
FIIs have been increasing stake in this company from 18.49% to 20.49% — around 2% jump in June quarter and the company has also benefited from the recently increased fertiliser subsidy from government. It has a total capacity of around 55,000 metric tonne per annum of melamine on which the Government of India has recommended extension of anti-dumping duty.
The company holds 19.80% to be precise promoter stake in GNFC Ltd, whose market capital is also increasing. It increased by almost 33% in the last one month. Keeping all these parameters, this company is looking really good to me. If anybody is taking trade or investment position right now in GSFC, the stop loss will be placed at Rs 110 for the target price of Rs 150.
What is the trigger here as far as DCW is concerned? What kind of levels can we target over 12 months?
DCW is the sole producer of PVC in India and the company also produces caustic soda with a capacity of around 96,000 tonne per annum. It contributes around 24% of the company’s total revenue in FY2021. The company is a major beneficiary of the recent price rise in caustic soda. My target price for DCW is around Rs 60. If anybody is taking trade at this position, one must keep a stop loss of Rs 39.
What about retail? That is an unlock play. Some of the other retail counters are doing very well. Phoenix is a retail play, being mall operators. Why do you like Spencer?
Spencer is my selection because of the expansion which they are going through. Spencer Retail is a part of the RP Sanjiv Goenka Group and has got multi-format retailers providing a range of quality products across diverse categories. The company operates around 191 retail stores of various formats in 42 cities, including 31 stores of Nature’s Basket Ltd. It has 14 distribution centres and around 88,000 stock keeping units. FIIs were increasing stake in the company in the June quarter from 5.25% to 5.68%.
Spencer is looking really good to me in the unlock theme. The target price for Spencer is Rs 145 and the stop loss is placed at Rs 103.
Just want a quick word on Bank Nifty. Bank Nifty is trying to claw back thanks to some of the private sector banks. Anything which you observe there?
Bank Nifty is outperforming Nifty itself and today it has made new life highs. This momentum in banks is going to continue because banks have been under pressure and have been underperforming compared to Nifty.
But in the coming days, banks are going to outshine — especially in the PSU basket. I think Bank Nifty is going to do really well in the coming days. I would suggest to keep a stop loss of around 37,950 because that is a strong support zone. If at all it gets breached, then we should expect 37,060 levels in Bank Nifty. But on the upper side, there is resistance at 38,350. If we cross that with volumes as the momentum is going on, 38,500-38.700 can be really achievable in Bank Nifty.
I am tempted to ask you about stocks like PVR, Phoenix Mills, Indian Hotels is up 10% any other bigger companies out of all the unlock player anything you like here?
Definitely PVR and Inox Leisure are two companies which have like has been focussed on today because the announcement of like getting opening up of the theatres in Maharashtra from 22nd of October so definitely these counters are going to like outperform from this point of time. I think PVR is spanning at around 1600 levels with the gain of around 6% from today but I feel that in coming days this stock will reach around 1700-1800 levels in coming time.