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Published on 23/05/2020 1:50:51 PM | Source: ICICI Direct

Quant Thematic - Divis Lab Ltd and Asian Paints Ltd by ICICI Direct

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Buy Divis Lab in the range of Rs. 2290-2370, Target: Rs. 2750; Stop Loss: Rs. 2060; Time frame: Three months…

Rationale

Divi’s Lab has shown noteworthy resilience and was able to move to life high levels in April despite weak market conditions. In the recent history the price distribution has been more on the positive side and stock has seen highest readings in 0% to 2% range where the right tail is significantly higher than the left tail indicating continuous accumulation in the stock.

From the delivery perspective, last couple of weeks saw below average delivery as stock has been consolidating in a range. However, last couple of sessions it witnessed sharp surge in delivery volumes as delivery Z score risen from -1 to 0.5 in quick time.

The 30 Day volatility of the stock has seen sharp decline below its 60 Day average indicating stability coming into the stock and it is likely to move higher along with the further decline in volatility.

 

Buy Asian Paints in the range of Rs. 1550-1610, Target: Rs. 1880; Stop Loss: Rs. 1390; Time frame: Three months…

Rationale

Among the stocks which have declined sharply, Asian Paints has not shown any major deviation in its price distribution pattern. Despite falling by almost 25% from recent highs, stock daily returns are largely distributed from -1% to 2%. Moreover despite the volatility, the right tail is higher than the left tail indicating ongoing accumulation in the stock.

From the delivery perspective, stock has started witnessing increase in Z score value in last couple of sessions and due to high delivery action, Z score has moved to 2 month high levels. We believe stock has been accumulated at lower levels and is likely to move higher.

The 30 Day volatility for the stock has moved sharply below its 60 Day average while 60 Day volatility is still on a rising trend. We believe 60D volatility will also start declining in the coming sessions providing stability coming into the stock.

 

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