LICHF Trading Buy Target :300
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LIC
Housing Finance Limited company provides housing finance services to
individuals for purchase, construction, repair and renovation of new or
existing flats and houses. The Company also provides finance on existing
property for business, personal needs and gives loans to professionals for
purchase, construction of clinics, nursing homes, diagnostic centers, and
office space throughout India.
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For
the last couple of days LICHF has been in a very narrow trading range of
250-260 after it collapsed from the recent highs of 277 post the 4th
Qtr results. Normally good stocks when they go into a narrow range, eventually
break out.
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Looking
at the fundamental rational behind the stock is that the last quarter was bad
mainly because of sustained pressure on NIM which resulted in
affecting the earnings outlook. LICHF’s management believes that NIM has
bottomed out. It expects NIM to trend back. The key drivers of improvement in
NIM would be decline in cost of funds, re pricing of teaser loan book and
increase in the proportion of developer loan book.
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We
feel that the major concerns for the stock are overdone as of now. The company
expects to sustain the improvement in asset quality with a favorable base,
earnings are likely to grow going forward.
Ø Looking at the futures activity
Stock has Open Interest of 6.3mln shares (lowest in 52 weeks). Since
expiry the OI has decreased nearly by 4.5%, with a price rise of 3%. We expect
buying interest to re-emerge in the stock and fresh long positions to be taken
in the near term.
Ø According to us, from technical
perspective RSI oscillator on daily chart is also showing some strength
indicating upside momentum reliable.
Ø We think the stock is overdue for a
large rally. According to our systems the stock has given a buy on the
intermediate charts (Daily Time Frames). There is a strong possibility it may
move up sharply. We suggest going LONG on LICHF at CMP 261 level with Target of
300 with stop loss placed at 238.
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