Analysis: DCB

Today’s pick is DCB [stockquote]DCB[/stockquote]. The stock started the year with an upmove to Rs. 52, and following resistance, fell to Rs. 36 levels. The stock has been in this channel for the entire year now. It is currently on the lower side, and hence it can be said that it will try to reach the top once again. In the last three months, the stock moved -14% vs. a flat Nifty.

DCB Technical analysis chart

Oscillator RSI and CMO are currently in no-man’s land. The stock is currently trading in the middle of the Bollinger bands. Short-term technical just saw a 9×18 bullish cross-over.

The MACD line and signal line are moving very close to each other in the positive direction, but the histogram levels are dropping. Also, the Long-term GMMA lines are contracting to reverse the direction of the move, giving out a positive sign for the stock.

DCB Correlation chart

DCB’s average correlation with the Nifty is 0.64, which is positive and quite strong. The scrip will be closely replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]

DCB Volatility chart

DCB has a historical volatility in the narrow range of 0.4 to 1.0. The scrip’s volatility is currently in the lower end of the range.

Globe capital has a buy call based on fundamentals:

· The Bank reported Net Profit of Rs. 26.9 Cr. in Q3 FY 2013 against Rs. 15.6 Cr. last year

· Improved asset quality

· Focus on building low cost franchise

· Robust promoter background and experienced management team

Given the technicals, we suggest a short-term BUY. A longer term call could be taken based on stocks behavior near Rs. 52 levels. Also, it is advisable to have a tight trailing stop-losses level to book profits in case of a sudden trend-reversal.

For a better picture of the NBFC sector as a whole, you can look at what the experts have to say here and here.

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