stocks to invest in: 3 stocks to buy within next 3-4 months (2024)

By ET Now

Last Updated: Oct 21, 2020, 04:37:00 PM IST

Nifty has a strong resistance at around 12,200 and if at all it crosses it, it can make a fresh high. On the downside, Nifty has strong support near 11,700, says Rahul Sharma, Head of Technical Research, Equity99 Advisors. eClerx Services, Sterlite Technologies and PNC Infra are three stocks he is betting on in next 3-4 months.

How are you looking at the Nifty or the Sensex in the medium term?
The Nifty has rallied up 1,200 points in a very short time. IT and banking helped the index to push further up but in this runup of 1,200 points, the midcaps and smallcaps have not been able to participate and have been underperformers.

As Q2 numbers are getting announced, some sectors are showing brilliant earnings, some up to pre-Covid levels but IT, cement, pharma, and HDFC has surprised the market. But FMCG is showing weakness in Q2 while Q1 was good for the sector. Going further, cement, metals and banks will do good and IT and pharma will face consolidation as the US election is on our head. Although Nifty has crossed the 12,000 mark, this rally is mostly because they have covered their short positions at each and every level of these gains. Right now, we do not want to get stuck in an aggressive trade. Nifty has a strong resistance at around 12,200 and if at all it crosses it, it can make a fresh high. On the downside, Nifty has strong support near 11,700.

eClerx is an IT stock which you like. What are the targets and why do you like it?
Midcap IT has been delivering good results. Q1 numbers for eClerx have been really good. Operating profit is up by 26%, net profit is up by 30%. In the past also, results had been good. It has a strong balance sheet. Mutual funds hold 15.5% stake in the company and FIIs hold around 17%. The valuations are very much attractive and my take will be to buy this company at the current market price of around Rs 715. Stop loss is at Rs 680 and target is Rs 820-825 in three to four months.

Digital IT internet companies are doing very well. Why do you like Sterlite among these companies?
Getting optical fibre to each and every village of India is one of the government projects. The projects in this sector are running very well. In the last one or two years, the company was facing big problems in terms of payment as big payments from the government were blocked majorly by BSNL. So, working capital became an issue at that time. With the government announcement, this company will do well. The strong fundamentals and balance sheets valuations are very attractive. The vocal for the local campaign will do well and I am taking a buy call on this stock at the current market price of around Rs 152-153 and the stop loss is placed at Rs 140. Targets are at Rs 180-190 in coming three to four months.

Lastly, PNC infra is the name which you like. What is the rationale there and the target?
PNC Infra is a mid-sized infra company. Over the last two to three years, the growth has been fantastic for the company. With a strong balance sheet, they have been doing good in terms of performance. Three-year sales CAGR is above 35% and profit is above 60% in terms of CAGR.

So fundamentals are strong for the company. The order book shows strength in the development. In fact, during Q1, when lockdown was imposed, the company had delivered stable performance and Q2 will be good for the company as well as they have a huge order book. Technically also, the stock has been in consolidation range and we can see a clear flag pattern breakout. My advice for PNC Infra would be to buy at the current market price of around Rs 170. The stop loss is placed at Rs 155 and targets are placed at Rs 215- 225 in the coming three to four months.

Mutual fund holding is around 23% for this company.