Technical Analysis of Indian Equities by Nooresh

Panic coming in Midcaps/Smallcaps and Non Index Counters.

Nifty is around the support levels of 5000 but we have seen some serious signs of panic selling in lot of midcaps/smallcaps which have knocked of 20-50% of their value in less then a week.


This sort of selling was not seen in drops till now. Although this implies a lot of pain in the short run but many stocks may create durable bottoms for long term in the process.


The post it to strictly deter investors from buying stocks just because they have fallen 20% or 30% in 2-3 sessions but one should focus on fundamentally strong stocks only. In Bear Markets the bad stocks are severely punished. Also one needs to focus on capital preservation in this period as on further falls we may not have enough cash or if we have cash may not have the guts 🙂 to buy.


Also USD-INR has almost touched 51. In 2008-2009 crisis we had seen a high of 52. This is one more factor to be noted that such a run up generally leads to massive pullouts by hedge funds leading to sharp drops in over-owned midcaps which have bad balance sheets ( Case in point – Sintex Inds. The fundamentals seem to be decent but Forex hit is killing the stock )


The strategy as before would be to buy the dips and sell the rise.As a trader this has been one of the most difficult periods over the last 5-6 years where there are way too many whipsaws and false starts. But one needs to keep their stop losses tight and exposures low till we get a good low risk-reward opportunity ( Last we had was a long at 4800 and an exit/short at 5300 )


We will look into more detailed charts by end of the week. Yet again its a good time to research fundamentally strong stocks. Readers can put in their best 3-5 picks in the comments column with reasons.




Nooresh Merani

Article by Nooresh Merani

Nooresh has written 2741 articles.

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{ 33 comments… add one }
  • manish November 17, 2011, 05:03

    kajaria ceramics – a stock that has been delivering and will continue to do so in terms of fundamental performance.
    tata motors

  • dharani November 17, 2011, 12:12

    (BSE Code- 532787 NSE Code- ESSDEE)
    (P/E-4, Equity- Rs32.04 cr., Market Cap- Rs474 cr.)

    Ess Dee Aluminium (EDA) founded in 1994 by Mr. Sudip Dutta is a leading supplier in India of customised aluminium foil-based flexible packaging solutions. It is in the business of cold rolling of aluminium “foil stock” to aluminium foil, which is further converted into “printers stock” through the process of lamination for strip pack or coating for blister pack. It also manufactures thermoforming poly vinyl chloride films (Rigid PVC films) as well as PVdC coated PVC barrier thermoforming films for blister packaging and caters largely to the needs of pharmaceutical companies and FMCG majors. Its wholly owned subsidiary, Flex Art Foil Private Limited (FAFPL), is engaged in subsequent conversion of “printers stock” to customized size and printing to proprietary designs. The company has installed capacity of 18,000 MT and a 4,200 MT PVC manufacturing plant. Its clients include big names in pharma and FMCG sectors like Cipla, Pfizer, Lupin, Glenmark Pharma, ITC, Pidilite, HUL, Johnson & Johnson and Wrigley India among others. EDA also has a presence in the prophylactics segment and provides specialized aluminium foil-based laminates for contraceptive brands. Ess Dee’s facility at Daman has been approved by contraceptive manufacturing companies like TTK and Hindustan Latex.

    EDA had acquired 90% stake in India Foils Limited (IFL), from Madras Aluminium Ltd (MALCO) a Vedanta Group Company in 2008. It infused Rs 115 cr. into IFL and intends to merge it during the current fiscal. When fully integrated, the IFL-EDA combine will have a capacity of 37,000 tonnes across 11 plants., more than twice the level of EDAL’s pre-acquisition capacity, making it the largest pharmaceutical foil manufacturing company. The synergy would provide EDA with additional capacity, thus providing it with an opportunity to grow its volumes. Further, IFL has three manufacturing facilities located in West Bengal backed by adequate front end conversion capacity which would allow EDA the flexibility to offer value added products

    EDA is the first company in India to manufacture dedicated high-end pharma packaging products like cold form blister and child-resistant-blister packaging. The quality of the product portfolio has been significantly enhanced by sophisticated and technologically advanced products. The company has strengthened its presence in eastern India after acquiring India Foils. EDA has established itself as a leading supplier of primary packaging materials and as a specialist in providing tailor-made aluminium foils-based flexible packaging laminates. The company also wants to increase its dominance by eating the share of unorganised packaging industry.

    Pharmaceutical packaging occupies a considerable portion of the overall drugs and pharmaceutical market in India and is growing steadily with the same pace of the industry. Pharmaceutical packaging consists of various types of glass, pet bottles, strip and blister packs, injectibles, ampules, bulk packs, etc.. The Indian pharma packaging market is estimated at Rs 5000 cr. with 50% being the unorganized sector. Among major countries, China and India will generate the fastest growth in demand based on rapidly expanding pharmaceutical manufacturing capabilities. EDA has a long-standing relationship of trust and comfort with key Indian and MNC pharma companies which are difficult for any new entrant to achieve in a short period of time and thus poses to be a high entry barrier.

    The company’s net sales have grown at a compounded annual growth rate (CAGR) of 125% over the past five financial years to around Rs 588 crore in FY10. The company has incurred higher capex over the past three years, as its high investment phase is over and it can generate more free cash flows going forward. The topline and bottomline have seen a marked improvement in the year ended March ‘10. Net profit margin also improved to 21% from 8% on a quarter-on-quarter basis. Having expanded its manufacturing facilities, the company has no major capex requirements in the coming years. For the year ended March 2011, EDA has posted net profit of Rs 118 cr. on net sales of Rs. 680.6 cr.. on consolidated basis. For the year ended March 2010, EDA had reported net profit of Rs 102.23 cr.. on net sales of Rs 588.45 cr. on consolidated basis. On a equity of 32.04 cr. (Promoters’ stake – 59.5%, FII/MF/DII stake- 31.54%), the FY11 EPS stands at Rs 37 and the dividend declared is 20%.

    EDAL is on the verge of a fast expansion of earnings due to organic initiatives. It could also get re-rated gradually over time due to the shift from a commodity kind of a business to a value-added business. Initiatives for inorganic growth could also provide upward thrust to its valuations. EDA has current installed packaging capacity of 370,000 million tonnes per annum (mtpa). The company has also undertaken a capex plan to increase packaging capacity at its Daman unit by further 15,000 mtpa which is expected to be partially operating from FY13. EDA is also foraying into a new product targeted at household packaging needs through its consumer division. The company estimates the potential market for this product at Rs1,500-2,000 cr. market and is planning to launch it by July 2011.

    On account of the merger with India Foils (IFL), the company is expected to land quite a few benefits. Foremost amongst them would be a tremendous boost to its capacity, which will now enable the company to grow its consolidated topline by 19% CAGR between FY11 and FY13. Furthermore, continued strong demand for packaging and stable outlook for margins make the company a good low-risk bet from a 2-3 year perspective. At the CMP of Rs 348, the EDA stock is trading at attractive valuations of 9.4x FY2011E Earnings (Rs 37) and 7.9x FY2012E earnings (Rs 44)(consolidated).

  • rohit shah November 17, 2011, 15:02

    1. alok ind 3 yrs tgt 100. tremendous capacity expansion.
    2. IFCI med term 1-2 yrs tgt 150. run in case of banking licence announcement.

    • nooresh November 17, 2011, 23:45

      Hi rohit,

      Alok looks good on capacity but debt in huge equity a concern.

      IFCI looks interesting

  • rohit shah November 17, 2011, 15:03

    alok ind
    good buys

  • ashish November 17, 2011, 17:27

    stocks like sesa goa ,gujnre coke,ucobank,ifci,Ge shipping, should be accumalted in every dips, are these companies have good prospects & fundamentals..

    • nooresh November 17, 2011, 23:44

      Ok ashish,

      It would be great if you could add a few more reasons on them.

  • Abhijeet Mitra November 17, 2011, 18:18

    Hi Nooresh,

    I m Abhijeet from Kolkata, i m big fan of TATA Group and want to buy 500 shares of TATA STEEL but in this downtrend all analysts r negetive in this counter. should i invest my total amount in this share if i get it around 350 level? please suggest me. And i am also interested in CORPBANK but volume in this counter is very low as this share is not traded in F&O.

    Abhijeet Mitra

    • nooresh November 17, 2011, 23:42

      Hi abhijeet,

      Well dont buy because you are a fan.

      Please understand the risks involved.

      Well technically its too early to take a call on Tata Steel.

  • Mihir November 17, 2011, 20:44

    my picks – tasty bites, mirc , kaveri seed

    • nooresh November 17, 2011, 23:36

      Will look into tasty bites.

      Mirc remains a dividend yield play acc to me.

      Kaveri Seed is a very very interesting company

  • Chaitali November 17, 2011, 21:02

    Hi a regular follower of your blog..
    i have 100 shares of Chambal fertiliser@118.Am a long term investor can hold it for a year.pls advise if i shud exit..Thanks

    • nooresh November 17, 2011, 23:36

      Hi chaitali,

      This is another stock which disappointed after a breakout. Luckily we took an exit at higher levels. I would consider it to be a good long term investment but horizon 1 year or more.

  • Bala November 17, 2011, 21:04

    Hi Nooresh,

    Can you suggest me some good fundamental stocks for 1 year period which will give good returns?


    • nooresh November 17, 2011, 23:35

      Hi Bala,

      as of now we are stuck on defensive stocks like Godrej Inds, Smartlink, Nesco as core picks.

  • Gaurav November 17, 2011, 21:59

    1. Venkys – Consumer Play – Have now started opening Own Brand Outlets

    2. HDIL – Should take support and form bottom around 2008/09 lows. May coincide with price correction in property prices and rising volumes.

    3. AnantRaj Ind – Downside looks limited and multibagger in long term

    • nooresh November 17, 2011, 23:34

      Hi Gaurav,

      I like Venkys. But can you tell me whether Anantraj and HDIL are managements which we can bank on.

      • Gaurav November 18, 2011, 12:36

        Hi Nooresh,

        (Forgot to include Godrej Industries in the list. I’m willing to hold that for 10 to 15 yrs.)

        If we adopt the same yardstick, are you saying that we can trust Reliance management. Both of us know that we are living in an era where a person does not mind cheating his/her family for money leave alone common man. Abnormal levels of Greed can be seen in eyes of a person who earns Rs 2000 a month to a person who earns Rs 2000 a second. Till now only middle class and rich used to cheat but now with the divide between rich and poorer getting even more wider you are seeing even the poorest of the poor jumping into this and finding new ideas to cheat other people.
        In short what i want to say is that if you start looking for absolutely clean management then you are finding something that does not exist. So lets live with this and try to find ‘least worse of’.

        Please let me know what you feel on what i just wrote. Would like to know how right or how wrong my assumption is.


        • nooresh November 20, 2011, 17:18

          Hi Gaurav,

          Well according to the yardstick Reliance as a management was never trustworthy !! but it performed over the last two decades.

          So you can never trust or bet on when somebody falters but a long history of good behaviour gives a higher probability of it remaining same.
          If the Tatas,Godrej etc have been committed for few decades they may stay ahead also is the assumption.

          In simpler terms investing in equities has its own risks. But with technicals and fundamentals all we try to do is reduce the risk element and increase the probability of making more money.

  • D.PRAVEEN KUMAR November 17, 2011, 22:22


    • nooresh November 17, 2011, 23:33

      Hi Praveen,

      Technically its hit all stoplosses.

      There is no major business change apart from a corporate governance issues in a group company order. Forex hits will remain.

      I would suggest you to hold on provided you have patience to see another 10-15% correction.

  • SATBIR KANGAR November 18, 2011, 00:44

    my pick is Kemrock, ENIL, Vinati, Dynamatic tech, Kernex, Bombay Burmah
    I pick all these because of special and unique business and almost all leader in their field(except Bombay Burmah – it has holding in britania, bombay dyeing and tea business)
    1. Kemrock: carbon fibre , and world best tie up for technology for next 1-2 year better yet to come.
    2. ENIL : booming FM business and it is leader. great potential.
    3. Vinati : pharma – world second largest in its field.
    4. Dynamatic : aerospace , hydraulic, automotive, unmanned aerial vehicle (defence), dynamic homeland security etc. great company .
    5. Kernex: complete monopoly ACD (anti collision device) , ACS (auto control system), Raksha Kavach, auto tracking and safety system etc… one negative only depend on railway and metro.. but when it turned around it is multi beggar , it is AMC business of its products give great returned..
    6. Bombay Burmah : good Holding in britania, bombay dyeing, — nothing to loose much.
    These are all almost near to strong support

    Nooresh sir, through some light technically and fundamentally …

    • nooresh November 20, 2011, 17:22

      Hi Satbir,

      Thanks for the detailed inputs.

      My pick of the lot is Bombay Burmah on sharp declines.

  • Ravi November 18, 2011, 01:33

    V-Guard Industries Ltd.

    Reason to believe – Tamilnadu Government is giving free distribution of mixers, grinders and fans around 2.5 million families (during the year 2011-12) . I hope this will increase the voltage stabilizer business . Any word on VGUARD.


    • nooresh November 20, 2011, 17:21

      Hi Ravi,

      Have heard good things about the V Guard mgmt. Worth a detailed study.

  • vikas raja November 18, 2011, 06:36

    sir.i like arvind, bharati ship yard and siyaram silk mill at what level i have to enter because all above company have good fundament

    • nooresh November 20, 2011, 17:21

      Hi Vikas,

      Thanks for your companies. Can u add more details.

  • SMG November 18, 2011, 08:43

    Tecpro Systems can be accumulated on staggered basis. the order book position is 4500Crs to be executed over 2-3 years so has good revenue visibility. It has acquired a water treatment company to expand its range of services.

    Vivimed Labs is another good choice with acquisitions and large product portfolio. Investments made by strategic investors recently.

    • nooresh November 20, 2011, 17:21

      Hi SM ,

      Well i have been hearing good things about tecpro since 300. Now at 200 it does deserve a watch but will test patience.

      Vivimed Labs is excellent but involvement of speculators in the stock is a concern.

  • saurabh shankar November 18, 2011, 12:06


    My picks would be Aditya Birla Nuvo, Piramal Health care and ABC bearings.

    We can look at IDBI also, as although all risks associated with PSU are their, but is quoting below BV and can be a play on indian investment/capex story.

    • nooresh November 20, 2011, 17:20

      Hi Saurabh,

      I too like piramal and abn. Will check into abc bearings.

      IDBI — Any reason apart from sub book. Majority of PSU banks are trading at par or below book.

      • saurabh shankar November 21, 2011, 15:12


        IDBI apart from sub-book, i think fundamentally also it is changing itself towards being a private sector bank with more focus on better clients. I have a close relative working in the company who tells that they are now genuinely focussed on doing better quality business.

        Also, as they are foussing more on fee income business which has been traditionally a weak point of bank. Hopefully, there NIM should also improve( presently at around 1.5-2%) due to better retail network.

        So could be a long term transformation story.


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