The recent sharp market run-up has made many stocks expensive, creating a challenge for investors seeking new buying opportunities. This situation presents a dilemma: selling existing holdings becomes difficult due to the absence of clear resistance levels, while buying feels risky with stocks potentially overvalued fundamentally and technically overstretched.
To navigate this market climate, we've identified three stocks that offer both attractive valuations and strong upside potential based on technical analysis. Our picks have a short- to medium-term focus (3 to 6 months). Investors can conduct their own fundamental research to potentially extend their investment horizon and capitalise on a larger price move.
IDFC First Bank, one of the fastest-growing mid-cap banks, has lagged the banking sector due to factors like a high cost-to-income ratio, sluggish core income growth, asset quality concerns, negative market sentiment, and analyst downgrades. The recent floods in Tamil Nadu further dampened sentiment, leading to increased provisioning needs. However, at the current price, the negatives seem priced in, limiting the downside risk.
Technically, the stock is trading near its monthly support level of ₹69-70. This level previously acted as strong resistance, which was broken in May 2023. Following the principle of polarity, this broken resistance can now become a significant support zone. On the weekly chart, the price remains below the 20-week EMA. However, considering the stock's proximity to longer-term support levels, a reversal is anticipated.
A good buying opportunity could be in the range of ₹64-52, which coincides with the quarterly mean and represents a lower entry point. Alternatively, a move and close above the 20-week EMA on the weekly chart could also signal an entry opportunity, potentially leading to a channel breakout as depicted in the accompanying chart.
Nykaa has undergone a prolonged consolidation phase. Throughout 2023, the stock built a strong base and has recently broken out of an ascending triangle pattern. The significant volume accompanying this breakout reinforces the conviction in this bullish move, suggesting the stock is poised for further gains from current levels. The stock can be considered around the current price with a minimum upside potential of 25-30% in the short term.
HDFC Life has enjoyed a recent rally. Despite this uptick, the valuations remain reasonable, offering further upside potential. The stock is trading close to its all-time highs, and recent volume suggests a potential imminent breakout. Several factors support the stock's momentum, including robust Q1 FY2025 results, a favorable industry outlook, positive regulatory developments (new surrender norms), and strong demographics within the Indian market.
Technically, the stock is gaining momentum and appears on the verge of breaking out of an inverse head and shoulders formation. This bullish pattern typically projects a target price equivalent to the height of the inverse head and shoulders. In HDFC Life's case, the short- to medium-term target could be in the range of ₹920-950.
Disclaimer: This analysis is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.
The last stock on our radar is Page Inds. Page Inds has posted its best Q1 revenue growth in seven quarters & that has clearly reflected on the stock price. Several brokerage houses have upgraded the stock considering the bright prospects in the near future. Effective cost control & operational efficiencies have enhanced profitability. The company has also seen a surge in demand for its premium innerwear & athleisure segments bolstering revenue. Valuations of Page inds are reasonably good considering the near term growth prospects.
Technically Page Inds has shown strong signs of reversal. The stock has been in a weekly downtrend since the beginning of 2023, but has now shown break of lower highs and lower lows on the weekly chart. On daily time frame one can observe a golden crossover in the stock around 38000 levels. A golden crossover happens when a 50 Day moving average crosses over a 200 Day moving average. It is a signal of a long term trend reversal. With no major near-term resistance levels in sight the stock looks set for the target levels of 50- 52000 in the medium term. One can look to accumulate the stock around current price & also use every dip as a potential buying opportunity
Page Inds showing golden crossover & a strong upward momentum.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
