While a stronger home economy is offering some consolation, market participants can see the fear of uncertainty in their high volatility movements, which are being driven by weak signals from international markets.
The Indian share market started Wednesday’s trade on a volatile note dancing between gains and losses. S&P BSE Sensex was trading flat and hovering around the 59,000 mark while the NSE Nifty 50 index was holding above 17,550. Bank Nifty was above 38,700 while India VIX (volatility index) was at 19 levels. While a stronger home economy is offering some consolation, market participants can see the fear of uncertainty in their high volatility movements, which are being driven by weak signals from international markets, according to analysts. Stock specific action may help investors pocket some gains in near term, and analysts at ICICI Securities have picked Apollo Tyres and Action Construction (ACE) stocks as their gladiator picks. The shares are expected to rally up to 15% in three months.
Apollo Tyres
Buying range: Rs 244-252 | Target: Rs 285 | Stop loss: Rs 227
Upside 14%
According to the brokerage report, the auto and auto ancillary space continued to outperform as the Nifty Auto index is seen extending its strong up move after last month’s resolute breakout above its multi year highs since 2017. Tyre stocks have remained resilient over the past two months and analysts are witnessing catch up activity with the rest of the auto ancillary space. “Within the tyre companies, Apollo Tyre is our top pick as it has recently generated a resolute breakout above the long term supply line joining the highs CY18 (Rs 307) and CY21 (Rs 261) with strong volume of more than double of its 50-week average volume signalling a structural turnaround and offers fresh entry opportunity,” it said.
Charts show that the stock has witnessed a faster retracement of the 16 months decline (Rs 261-167) in just two months. “A faster retracement in one fourth of the time interval signals strength and a robust price structure. We expect the stock to continue with its current up move and head towards Rs 285 levels in coming months as it is the 123.6% external retracement of the entire preceding decline of the last 16 months (Rs 261-167),” the brokerage added. So far this year, Apollo Tyre share price has rallied 13%. And in the next three months, the share may rally 14% more.
Action construction (ACE)
Buying range: Rs 238-245 | Target: Rs 282 | Stop loss: Rs 217
Upside 15%
Capital goods sector has been outperforming so far this year on a relative basis and resumed its structural uptrend in the month of July. “Within construction space, ACE’s share price has undergone solid base formation since November 2021 and is now seen breaking past this range indicating conclusion of corrective phase and offering re-entry opportunity,” said analysts in the report. According to the technical charts, the stock witnessed consolidation in the Rs 200-240 range, which is anchored on long-term 52 week EMA that has been held since mid-2020. The brokerage expects the stock to resume its up trend and head towards its 52-week high.
“On oscillator front, weekly RSI is in rising trajectory rebounding taking support at its nine period’s average, thus validating the positive bias,” the report stated. So far in 2022, Action Constructions share price has rallied 11% and analysts see up to 15% more jump in three months. Company’s capacity utilisation is expected to increase 10-15% in all segments by the end of the current financial year. Capex plans for FY23 are at Rs 45-50 crore with Rs 30 crore used in installing a new capacity for 100-160 tonnes crawler crane, which will have a potential of around Rs 350- 400 crore revenue, according to ICICI Securities. It will be operational by Q4FY23 and is expected to have a revenue of Rs 100 crore in the first year.
