Author: Abhishek

Analysis: JPASSOCIAT

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Jaiprakash Associates [stockquote]JPASSOCIAT[/stockquote] has been the darling of stock market speculators for a while. The company can be best described as an infrastructure conglomerate that is into everything from mining to power production. The last couple of years hasn’t been kind to infrastructure companies in general and JP is no exception. Since Jan this year, the stock is down -29.44% compared to Nifty’s -4.53%

JPASSOCIAT technical chart

As you can see from the chart, the stock has long-term support at Rs. 60 levels (off which it bounced off recently) and resistance at Rs. 80 levels. Just yesterday, the stock saw a bullish 4×9 Cross-Over. RSI levels at mid-40s and an imminent MACD signal-line cross-over are supportive to a bullish outlook as well.

JPASSOCIAT - Jaiprakash Associates Limited - Quarterly Results

There isn’t much to write home about from a fundamental point of view. Most recent 4Q EPS is around 3.11 and it barely made it past the finish line in the Oct-Dec 2012 quarter. Dividends are meager and the stock is currently trading at a PE of around 22. It has a beta of 2.12 which is one of the highest that we track. Clearly, JPASSOCIAT is not for the faint of heart.

All said, JPASSOCIAT is good for a short-term trade. Buy it at Rs. 60 levels and sell it once it hits Rs. 80. For the long-term, wait for clarity in policy direction before making a bet on infra stocks.

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Analysis: RELIANCE

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Reliance Industries [stockquote]RELIANCE[/stockquote] has been a permanent disappointment since 2005 and this year has been no different. The stock is down 7.46% compared to the Nifty’s 5.35%. The stock just doesn’t seem to have the zing in spite of the bonus in 2009, the more than Rs. 8/share in dividends and stock buy-backs.

Reliance chart

After breaking its up-trend line, the chart shows that Reliance is headed towards its most recent support area at Rs. 770 levels. RSI at mid-20’s is basically plumbing the depths at this point – the stock has bounced whenever it has seen such dire readings. However, just about every other technical indicator is bearish. Its 18-day SMA cut the 9-day SMA; Aroon is bearish; MACD histograms are not helping either.

The company remains a cash machine. So much so that Mukesh Ambani is using to enter pretty much all sectors of the Indian economy. It looks like by the end of this decade, Reliance will be dabbling in everything from telecommunications to power to banking. So even though Reliance is classified as a petrochemical major, its undergoing a transformation into a wide winged conglomerate.

The stock, however, is not cheap. With a PE of 12.84, it is trading above other oil multinationals like Exxon (9.30) and Total (7.83). It has a sub-market beta of 0.86 which could have been good news except that its Bull & Bear betas are skewed towards the downside.

RELIANCE - Reliance Industries Limited - Quarterly Results

To conclude, we are a short-term BUY on RELIANCE. We expect a bounce off these over-sold conditions and a support at Rs. 770 levels. The long-term is a bit hazy. The company is at risk of losing focus by spreading itself too thin on vanity projects and blowing away its cash-hoard on capital intensive projects with low returns and intense competition.

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Analysis: COLPAL

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Colgate-Palmolive [stockquote]COLPAL[/stockquote] investors have had a tough 2013. After hitting an all-time high of Rs. 1580, the stock has slid to Rs. 1250 levels – a whopping 21% drop. Investors have been worried about falling sales in spite of holding prices steady and the imminent entry of P&G into the oral-care market. That said, Colgate holds over 54% of the toothpaste market and has been busy expanding its distribution and marketing into rural areas where per capita consumption of toothpaste is half that of urban areas.

COLPAL Technical Chart

We were a short-term buy back in February. However, the technicals this time are giving mixed signals. Our 4-9-18 model has been flipping between buy and sell all of this month and Aroon is stuck in neutral. However, RSI levels seem to be headed toward over-sold levels, suggesting a bounce from support at Rs. 1250 levels is possible.

The stock does pay a fair amount of dividend – Rs. 8/share was recently announced and given that its in the FMCG space, it is more-or-less recession proof. An extremely low beta of 0.16 provides a certain measure of comfort during volatile times.

COLPAL quarterly results

We would be buyer’s if the stock can hold on to its Rs. 1250 support levels over the next few days. Otherwise the next support is around Rs. 1200. This is a good stock to own for long-term buy-and-hold investors at these levels.

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Analysis: TATASTEEL

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We last took a look at TATASTEEL [stockquote]TATASTEEL[/stockquote] in October last year. We were waiting for a decisive breakout above the (down) trend-line before getting bullish on the stock. It made a 52 week low of Rs. 320 last Friday.

Technical chart of TATASTEEL

As you can see from the chart, the stock has tested the Rs. 320 levels twice before since 2009 and has bounced back each time. From a valuation point of view, it is trading at a PE of ~8 which is on par with its global peers like US Steel and Arcelor Mittal. Plus, the Tatas have been giving a Rs. 12 per share dividend since 2011. However, the global outlook for the metal is bearish, with European steel demand being down by 30%, and the industry remains highly fragmented.

So the question is will TATASTEEL be a good  buy at today’s levels? The RSI indicator is at neutral and MACD is bearish. So from a technical point of view, it is a short-term sell. From a long-term perspective, it is trading at valuations that might be a good entry point for investors who can stomach volatility. If the stock closes above Rs. 320 levels today, it is a long-term buy from our point of view.

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Weekly Recap

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NIFTY.2013-03-18.2013-03-22

The NIFTY ended on a bearish note, melting down -3.26% for the week.
Biggest losers were RELINFRA (-18.36%), DLF (-15.25%) and JPASSOCIAT (-14.43%).
And the biggest winners were LUPIN (+2.91%), ITC (+1.23%) and HINDUNILVR (+0.11%).fii.2013-03-18.2013-03-22
Decliners eclipsed advancers 47 vs 3

Gold: +1.04%, Banks: -5.67%. Infrastructure: -0.96%,
Net FII flows for the week: $315.10 mm (Equity) and $219.03 mm (Debt)

At the begining of this week we gave a long call for LUPIN in this post.

 

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