Top Five All-Around Value Stocks

(medium term perspective)

Sundaramurthy Vadivelu

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In this article let us analyze 5 India stocks which are technically bullish for the medium term. The discussion is based on weekly charts.

Indraprastha Medical Corporation (Group: B1, Scrip Code: 532150):

Indraprastha Medical Corporation is the holding company for Delhi based multi-speciality Indraprastha Apollo hospitals, a joint venture between Apollo Hospitals and Government of Delhi. It specializes in cancer, cardiac, neuro surgery, radiology and paediatrics. It earned a net profit of Rs.14.7 crores for the financial year 2006 – 07.

http://groups.google.com/group/theindiastreet/web/INDRAMEDCO_160907.jpg

This stock recorded a high price of 54.90 in July 2005. Since September 2005 it has been on a downtrend. It formed its first higher low of 25.40 in March this year with the first wave ending at 36.35 in June. This week, it broke this resistance and closed above it with good volumes. The stock is expected to test its previous high at 54.90 in the medium term.

Indus Ind Bank Limited (Group: A, Scrip Code: 532187):

We discussed this stock in my previous article, “Hot or Not? Private sector banks on a roll!”. This bank is the brainchild of Srichand Hinduja, a non resident Indian businessman. Ashok Leyland Finance Limited, a leading hire purchase and leasing finance company merged with the bank in 2004. It declared a net profit of Rs.68.22 crores for the financial year 2006 – 07.

http://groups.google.com/group/theindiastreet/web/INDUSINDBK_160907.jpg

We discussed about the stock struggling to break its previous high at 64, even though it was making higher highs and higher lows. Ultimately, the breakout was achieved this week, with the stock closing at 65.90. The level of 64 could not be broken for more than a year. Now that the stock has overcome the strong resistance, we can expect the stock to test its previous high at 83.90 for the medium term.

Navneet Publications (India) Limited (Group: B1, Scrip Code:508989):

Navneet Publications is engaged in the publishing of educational books. The books list includes high quality books, supplementary books like guides and question sets in four languages, English, Hindi, Marathi and Gujarati. Navneet also produces various titles in the children and general books category, which are not based on syllabus, such as activity books for children, health series books, cookeries, etc. Navneet declared a net profit of Rs.43.5 crores for the financial year 2006 – 07.

http://groups.google.com/group/theindiastreet/web/NAVNETPUBL_160907.jpg

Navneet Publications has not seen much action in the stock market in the last 16 months. Just before the May 2006 collapse it registered a high of 70. It attempted to break this level in September 2006 but failed. This week, almost after one year, it has broken out with good volumes and closed at 77.80. The previous high at 70 should now act as a strong support for the stock. So, any decline in the stock should be used to accumulate or enter. The medium term target for the stock works out to 108.

Sabero Organics Gujarat Limited (Group: B1, Scrip Code: 524446):

Sabero Organics manufactures agrochemicals such as formulations/active ingredients and speciality chemicals/intermediates. The company exports its products to over 50 countries covering Australia, Asia, Africa, Europe, Middle East and the Americas. In order to facilitate the registration of its products and provide better customer service, the company has recently set up subsidiaries in Australia, Argentina, Netherlands and Brazil. The company’s net profits were Rs.0.41 crores in 2006 – 07 as compared to Rs.3.1 crores in 2004 – 05.

http://groups.google.com/group/theindiastreet/web/SABERORGAN_160907.jpg

The stock had been on a downtrend since last 2 years after hitting a high of 43.30. It however, found support when it reached a low of 9.85 in July last year. It was consolidating for a year since then. This week, it has managed to close above its previous high at 17.35 with more volumes than its previous peak. The stock’s target for the medium term works out to 30.30, which was its previous high and also 61.8% retracement level from a high of 43.30.

Zuari Industries Limited (Group: B1, Scrip Code: 500780):

We discussed about Chambal Fertilizers and Chemicals Limited, a K.K. Birla group company in my earlier article, “Buy These 5 Stocks and Forget about them”. Zuari Industries Limited (formerly Zuari Agrochemicals Limited) is another K.K.Birla group company. Zuari opertaes a nitrogeneous fertilizer plant in Goa, with an installed capacity of 946,200 metric tonnes. It comprises a single stream ammonia plant, a urea plant, an NPK plant and a DAP plant along with related on-site and off-site facilities for handling raw materials end products as well as the generation of steam and captive power. It declared a net profit of Rs.419 crores for the financial year 2006 – 07.

The stock last heavily during last year’s huge correction between May and June i.e. it fell from a high of 364 to a low of 128.50 (about 65%) loss. It bounced back and made a high of 248.40 in January 2007. But once again, it fell back near its previous support levels.

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Last week, it managed to break its previous resistance and closed above it with more volumes than the previous peak. More importantly, it managed to close above 61.8% retracement, which is a strong resistance level while pull back. The stock may be expected to reach 364 in the medium term, which was its previous high and another major resistance.

Sundaramurthy Vadivelu

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Hot or Not? Private sector banks on a roll!

By Sundaramurthy Vadivelu

Disclosure

The banking system in India is more than 200 years old. The General Bank of India was founded in 1786 (now defunct) was the first ever bank in India. The oldest surviving bank in the country is State Bank of India (SBI), which was established as “The Bank of Bengal” in 1806. Subsequently more banks were in operation, like Allahabad Bank, Punjab National Bank, Bank of India etc.

After India’s independence, the larger commercial banks were nationalized in 1960s to enable the government in controlling credit delivery. By 1995, the liberalization policy of the government allowed private sector participation in banking industry. This was followed by foreign direct investment (FDI) in banks. As of now, there are 28 public sector banks (with Government of India holding a stake), 29 private banks (without Government stake but listed in stock exchanges), 31 foreign banks and plenty of medium and small co-operative banks. The Reserve Bank of India (RBI) is India’s central bank and it is the ultimate authority for control of banking operations.

At both BSE and NSE, several public sector banks (State Bank of India, Punjab National Bank, Indian Bank etc.) as well as private sector banks (ICICI Bank, HDFC Bank, Kotak Bank etc.) are listed.

Let us now discuss the financial and stock performances of some listed private sector banks. Bank of Rajasthan is listed under ‘T’ group in BSE and is not included here.

The following table shows 6 month, one year and 5 year percentage return of these stocks.

For detailed information about close prices on various dates, please click here.

Scrip	6 month return	1 year return	5 year return
AXISBANK	18	68	1,489
CENTBOP	5	58	336
CUB	15	60	610
DCB	45	113	113
DHANBANK	25	196	158
FEDERALBNK	42	71	1,128
HDFCBANK	15	32	434
ICICIBANK	1	50	532
INDUSINDBK	10	16	222
INGVYSYABK	39	83	155
J&KBANK	6	69	658
KARURVYSYA	16	47	367
KOTAKBANK	56	120	1,903
KTKBANK	1	60	413
LAKSHVILAS	7	52	277
SOUTHBANK	36	93	287
YESBANK	14	99	183

It can be seen that NONE of the private sector banks have yielded negative returns in the last 6 months. Axis Bank, Federal Bank and Kotak Bank have appreciated more than 10 times in the last 5 years. Dhanalakshmi Bank, Development Credit Bank, Kotak Bank and Yes Bank have doubled in the last one year.

Bank Nifty (NSE) and Bankex (BSE):

The private sector banks in Bank Nifty and their weightages are given below:

Scrip	Weightage %
HDFC Bank	12.35
ICICI Bank	28.78
Kotak Bank	6.44
Axis Bank	5.52

The private sector banks in BSE Bankex and their weightages are as follows:

Scrip	Weightage %
ICICI Bank	41.91
HDFC Bank	13.35
Axis Bank	5.96
Kotak Bank	4.48
Centurion Bank of Punjab	1.62
Federal Bank	1.23
Karnataka Bank	0.96
Yes Bank	0.65

This amounts to weightages of 53% and 70% for private sector banks in Bank Nifty and BSE Bankex respectively.

Let us now analyze the medium term outlook for Bank Nifty.

http://groups.google.com/group/theindiastreet/web/BANKNIFTY_WEEKLY.jpg

In the weekly chart displayed above, the BANKNIFTY is currently on a corrective decline (wave 4) from a peak of 7209. The first wave had a retracement of 193% i.e. 3414 to 6596. According to Elliott wave theory, the previous high should act as a support when the stock corrects during the five wave pattern. It can be seen in the above chart that it was exactly the case. Bank Nifty managed to close below its previous high of 5074 once and it had bounced back. Similarly the previous high at 6596 should act as a support for the current decline, though it has managed to close below it on two occasions. The Bank Nifty should reverse in all probability soon. The target, when calculated from a low of 4837, works out to 7826 which is a good 1350 points away.

The monthly chart of BSE Bankex is shown below. (Chart courtesy: BSE web site www.bseindia.com)

http://groups.google.com/group/theindiastreet/web/BANKEX_MONTHLY.jpg

There are no reversal signs in the long term chart of Bankex either. The Bankex too, is bullish now. The long term target for BSE Bankex works out to 9784 when calculated from a low of 6047.

Let us now compare two major private sector banks, HDFC Bank and ICICI Bank in terms of Financial performance in the last few years.

http://groups.google.com/group/theindiastreet/web/HDFC_Bank_Performance.jpg

The two banks have performed consistently. HDFC Bank’s income though, is about 1/3 rd of ICICI Bank’s.

http://groups.google.com/group/theindiastreet/web/ICICI_Bank_Performance.jpg

Medium term out look for private sector banks:

We discussed about ICICI Bank in my previous article “5 India stocks to avoid (medium term perspective)”. A “double top” formation in weekly chart means that the stock will struggle to cross its previous high at 1010. The only encouraging factor though, is that it has still not closed below 791 which is its previous low. So, unless we get a confirmation of bullishness we cannot possibly look for investment opportunities in this stock.

Development Credit Bank (DCB) has not broken its previous resistance at 120.55 on a weekly close basis. It has lost about 14% from its highest close and still there is no sign of any reversal on the upper side. Read more about this stock in “The India Street Analyst Upgrades and Downgrades – Review”.

Indus Ind Bank (see weekly chart below), has not broken its resistance at 64. This stock is looking slightly weak in the sector.

The other private sector bank stocks are bullish in medium term charts, though some have lost more than 20% from their highest close. The trendline supports hold well in these charts; there are no major reversal patterns or candlestick patterns either. So we have to conclude that these stocks would be heading for higher levels.

http://groups.google.com/group/theindiastreet/web/INDUSINDBK_WEEKLY.jpg

Indus Ind Bank, as shown above, is struggling to break its previous resistance at 64. But it is forming higher highs and higher lows though.

Conclusion:

Except for ICICI Bank, DCB and Indus Ind Bank, the rest of the private sector banks remain bullish; Medium term investors can hold these stocks for some more time.

Sundaramurthy Vadivelu

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