Prabhudas Lilladher lists 2 blue-chip stocks to watch out for as marker scales new high

Following a surge in blue-chip stocks, Indian benchmark indices hit their record high for the fifth straight session on Friday, June 28.

The Nifty surged 129 points to an unprecedented high of 24,124, while the Sensex zoomed 428 points to reach a record pinnacle of 79,546. This milestone comes shortly after the Nifty crossed the significant psychological threshold of 24,000 and Sensex breached the 79,000 mark for the first time in the previous trading session on June 27.

Just this week, the Indian market has jumped 2.5 percent, extending gains for the third straight week while for the month of June, the benchmarks are up 7 percent after a volatile May.

"The market momentum has the potential to take the Sensex to 80,000 level. The healthy trend in the recent rally is that it is driven by fundamentally strong largecaps like RIL, Bharti, and the leading private sector banks. However, corrections can happen at any time since the market is in the overbought zone and DIIs are booking profits. It is interesting to note that in the tug-of-war between the FIIs and DIIs, the latter has emerged victorious whenever this happened during the last 3 years. The elevated valuations in the market continue to be a concern. However, the market is not yet in bubble valuation territory. The weak trend in the broader market is likely to continue. Investors can consider booking partial profits in the mid and smallcaps and move the money to fixed income," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Amid this backdrop, domestic brokerage house Prabhudas Lilladher has come out with 2 blue-chip stocks to watch out for. Target prices indicate strong upside potential as both companies navigate strategic and regulatory developments, it said.

Bajaj Finance: The brokerage has a target price of ₹8,200 for the NBFC, implying an over 14 percent upside, and a stop loss of ₹6,850.

The NBFC has informed the exchanges that the RBI has lifted restrictions on sanctioning and disbursing its digital loans, which were imposed in November 2023. These restrictions had temporarily impacted profitability in Q3 FY24 and Q4 FY24, resulting in a 4 percent decline in net income. According to the brokerage, lifting these restrictions is expected to lead to improvements in Return on Assets (ROA) in a traditionally slower Q1, driven by enhanced fee income.

PL also highlighted that the company's prospects could improve further, particularly at the higher end of expectations, if it successfully recovers lost ground in Q4 and increases its fee contributions.

Derivatives View

The scrip is witnessing pre-rollovers at 58 percent, with the option chain strongly favoring the Bulls. Put writers are decisively aggressive at 7000PE, adding over 1200 contracts overall, while Call writers are aggressively building positions all the way up to the 7500 and 8000 strikes, with more than 2000 contracts each. The stock has also sustained a breakout above the 6900 zone on a monthly basis, suggesting continued momentum for a sharp upside

Reliance Industries: PL has a target price of ₹3,200 (4.5 percent upside potential) for the oil-to-telecom conglomerate and a stop loss of ₹2,850.

As per the brokerage, Reliance Industries Limited (RIL) plans to commence operations at its New Energy giga-factories in 2024. RIL intends to leverage a substantial captive hydrogen demand to establish scalable capacities in electrolyser and solar technologies. The brokerage cautioned investors not to anticipate significant EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) contributions from these projects in the short term.

However, the brokerage noted that enhanced communication from RIL regarding its New Energy business could potentially drive the stock's performance. Additionally, RIL's recent guidance indicating a commitment to maintain a net debt to EBITDA ratio of less than 1x suggests positive prospects for free cash flow generation, as emphasised by the brokerage.

Derivatives View

The scrip is witnessing pre-rollovers of 54 percent, with the next series showing aggressive put writers building up their positions convincingly at 2900PE- overall more than 4100 contracts. Call writers also hint at upside potential up to 3200, with maximum fresh additions at 3200CE - more than 445 contracts. The stock has been consolidating on a monthly basis between the 2850 and 2940 zones. A breach on the upside will likely trigger sharp momentum towards higher targets.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.