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Nifty Outlook

Markets started the week on an optimistic note amid firm global cues. After opening the gap up, the benchmark traded in a positive range throughout the day, largely driven by healthy buying in banking, auto, metals and realty stocks. Consequently, the Nifty ended near day's high at 15,834 levels, up by 0.7%. The broader too ended with gains in the range of 0.5-0.8%. On the sector front, all the indices ended in the green, except for IT which ended with marginal losses.

We expect positive momentum to continue however a decisive breakout above 15,900 in Nifty is critical for any sustainable up move. With the beginning of the earnings season, the focus would gradually shift from global markets to domestic factors and we feel pick up in demand & economic activities are likely to drive growth this time. Meanwhile, we iterate our preference for defensive such as IT, Pharma and FMCG and suggest picking selectively from other sectors as well.

News

* Godrej Consumer provided a quarterly update for Q1FY22, wherein they expect to deliver sales growth in the high teens, driven by strong volume growth and price increase. Further, strong double-digit sales growth is expected in their Home Care and Personal Care categories.

* ITD Cementation India announced that it has secured two orders from Gujarat Metro Rail Corporation and Military Engineer Services worth ~Rs 585cr.

* Heranba Industries announced that it has received environmental clearance from the Ministry of Environment, Forest and Climate Change of Government of India, for expansion of Pesticides Intermediates, Fungicides, Herbicides, Insecticides manufacturing at Sarigam Plant in Gujarat.

Derivative Ideas

INDIGO FUTS added around 6% in open interest as LONG buildup was seen in it. Current chart pattern also indicates further up move in its price. We suggest buying in INDIGO in cash as per below levels.

Strategy:- BUY INDIGO BETWEEN 1745-1750 STOPLOSS 1715 TARGET 1810.

Investment Pick - Finolex Industries Ltd.

Finolex Industries (FIL) Q4FY21 results were above our estimates. Revenue grew by 62.5% YoY to Rs 1,249cr largely driven by better volumes from resin business and realization from both businesses. Resin segment posted growth of 112% YoY to Rs 920.2cr while the company’s pipes and fitting segment grew by 43% YoY to Rs 901.7cr. EBITDA stood at Rs 410.1cr, up by 296% YoY while its margins witnessed strong improvement of 1936bps to 32.8%. Its net profit grew by 410% YoY to Rs 298.8cr with margin expansion of 1629bps.

FIL is well placed in the plastic pipe segment with a strong presence in agri pipes and manufacturing of resin. Going ahead, it has plans to grow in the non-agri segment, expand its manufacturing of PVC resin, increase distribution network and change product mix which will aid in earning better revenues as well as profits. Besides it has strong brand recall value, healthy balance and decent cash flow which bode well for the future growth of the company. So, we maintain a Buy rating on the stock with a target price of Rs 222.

Buy - Finolex Industries Ltd. @ 9-12 Months CMP 179.75 TGT 222

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