Stock Recommendations

SENSEX (26877) BSE Sensex opened flat and witnessed a sustained selling pressure throughout the session. The bears were in full swing throughout the day and made index to breach its psychological 27000 level. The index witnessed significant selling pressure as all the sectoral indices were trading in the red. The index wiped off the gains of previous trading session and closed with loss of 630 points. Now index needs to hold above 26800 levels to bounce back towards 27000 and 27300 levels otherwise weakness may continue towards 26500 and 26300 levels.

STOCK IN FOCUS

Dr Reddy’s Labs gained ~3.5% in Tuesday’s trade with high volumes. The company has posted strong numbers in 4Q beating our estimates on the APAT front. While sales for 4Q grew 11% (due to conscious slowdown in Russia), strong performance from US, India and Europe have partially offset the Ruble impact. Despite higher R&D sales at 13%, the company has reported margins at 23.4%, up 160bps yoy. We expect margins to recover gradually at ~24-25% for the next 2 years led by high investments in complex generics-peptides, biosimilars, and injectables (30% of current US sales) for the future. However, despite moderation in sales, acceleration in complex launches in the US (pipeline of 43 Para IVs and 13 FTFs) will keep up the growth trajectory in FY16-17E. 

We recommend a Buy on Dr Reddy’s with a Target Price of Rs.4,075.

INTRADAY PICKS

Hexaware Technologies (LTP: 254) SELL For today's trade, short position can be initiated only in Rs.260-263 range for target of Rs.250 with a strict stop loss of Rs.265. 

Havells India (LTP: 285) SELL For today's trade, short position can be initiated only in

Rs.294-298 range for target of Rs.280 with a strict stop loss of Rs.300. 

CASTROL is holding the gains even after the sharp decline in the broader market. It has given a strong breakout from its falling trend line with rising volume activity. It is turning from the lower levels and holding the gains above its 50 DMA. It gave the highest daily close of last 32 trading sessions thus indicating the further up move in the counter. One can buy the stock between 468 to 473 with stop loss of 460 for the upside target of 491 levels

DABUR is moving in a narrow range from last three weeks and witnessing support base buying at lower levels with rising trading and delivery volumes. It breached its 13 DMA and managed to hold above 260 zones. We are expecting it to see an up move towards 270 and higher levels so suggesting to buy the stock between 250 to 255 with stop loss of 250 for the upside target of 266 levels.

Positional Stock Recommendations

Though UPL is moving in rising channel pattern from last three and half months, but RSI (14,9) started declining from the same time and later moved in falling channel. As per the current set-up, we believe stock will break down post consolidation and visit lower band of the rising channel (i.e. placed around Rs.415).

Thus, for today's trade, short position can be initiated only in Rs.500-510 range for target of Rs.415 with a closing based stop loss of Rs.530.