Blog posts of '2024' 'March'

Stock name: Dalmia Bharat Ltd.

Pattern: Double top pattern

Time frame: Daily

Observation:

Starting from June 2022, the stock has consistently trended upwards. From August 2023 to March 2024, it stabilized and formed a double top pattern on its weekly chart. In early March 2024, the stock broke out of this pattern. Following the breakout, it has been descending accompanied by a low RSI level. Technical analysis suggests that if this momentum persists, the stock may continue its downward trajectory.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: Rashtriya Chemicals & Fertilizers Ltd.

Pattern: Head and shoulder pattern

Time frame: Daily

Observation:

Post COVID the stock has seen upwards movement in the overall view. This consolidated and from December 2023 to March 2024, a head and shoulder pattern emerged on the daily chart. Notably, around March 12 and 13, 2024, the stock experienced a breakout from this pattern, accompanied by average trading volume. Presently, the stock's RSI level indicates significant weakness. Technical analysis suggests that if this momentum persists, the stock may potentially witness further decline.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• Muthoot Microfin, part of Muthoot Pappachan Group, expands its reach into Telangana and plans entry into Andhra Pradesh by June. Following a state high court ruling, microfinance lenders are returning to these states. The Kerala-based NBFC-MFI aims to open four branches in Telangana this month, focusing on increasing its distribution network and customer base.
  
  
• The Indian government has increased the windfall tax on petroleum crude to Rs 4,900 per tonne. This hike comes amidst soaring global crude oil prices and aims to augment revenues amid economic challenges. The move is expected to impact oil refining companies, potentially leading to increased costs for consumers.
  
  
• Some Adani Group's dollar-denominated bonds have experienced significant declines, marking their steepest fall in over six months, following reports of a US investigation. Allegations suggest that Adani Group companies may have violated environmental norms and regulatory requirements. This development has sparked concerns among investors, leading to a sell-off in Adani Group bonds.

As we are approaching the end of the financial year, there is a ruckus all around about the tax saving investments and their declarations to the employer. There are various investment avenues like ELSS, PPF, PF, Life Insurance, Health Insurance etc. which you can consider before the year end for tax saving.

From FY 2020-21 onwards, there are two different tax regimes in place for individuals with different tax structures. Going forward, we will understand these two regimes in detail.

In today’s blog, let us try and understand whether we are required to file the annual income tax return.

Firstly, Income Tax return filing is mandatory an individual whose annual income is more than the basic exemption limit of Rs 2.5 lakh. The basic exemption limit for senior citizens (60 years onwards and less than 80 years) is Rs 3 lakh, and for super senior citizens is Rs 5 lakh if the old tax regime (scheme) is opted. Under new tax scheme however, basic exemption limit is Rs. 3 lakhs for every individual.

Now, even though you do not fulfil the above parameter, there are some additional parameters which necessitates you to file annual income tax return.

1. Deposited an amount or aggregate of the amounts exceeding Rs. 1 crore in a Current account maintained with any bank (including co-operative bank accounts). This is applicable even if you split your deposits to multiple current accounts.; or
2. Incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or
3. Incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or
4. holds, as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India; or
5. is a beneficiary of any asset (including any financial interest in any entity) located outside India,
6. If any person who has sustained a loss in any previous year under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss or any part thereof should be carried forward

Now, if you fall within any of the above parameters, you will be required to file Annual Income tax return. It is also necessary to file income tax return to obtain refund of any TDS deducted.

Now, you may ask, what if I don’t file my income tax return, in such cases you could face a hard time getting a loan, visa approval, etc. Also, the major consequences of late filing of ITR is that you will have to pay interest along with penalty.

To understand more about such interesting concepts, stay tuned.

Until next time !!!

Stock name: Sterling and Wilson Renewable Energy Ltd.

Pattern: Island reversal pattern (Bearish)

Time frame: Daily

Observation:

Since October 2023, the stock has been trending upwards. The stock has experienced a significant gap up after January 19, 2024. However, in March 2024, it underwent a gap down, returning to the January 19 level, resulting in an island reversal pattern on the daily chart. The island reversal pattern is a reversal pattern as its name suggests. With the RSI currently low, technical analysis suggests the stock might continue its downward trajectory if the present momentum persists.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: Craftsman Automation Ltd.

Pattern: Head and shoulder pattern

Time frame: Daily

Observation:

Since its listing, the stock has consistently trended upwards. Between August 2023 and March 2024, it consolidated, forming a head and shoulders pattern on the daily chart. On March 13, 2024, the stock broke out from this pattern, backed by significant trading volume and a bearish MACD indicator. Presently, the stock is undergoing a retest of the breakout level. Given the low RSI, as per technical analysis completing this retest may signal further downward movement.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• The National Payments Corporation of India (NPCI) has granted approval to Paytm to operate as a third-party application on the Unified Payments Interface (UPI) platform, in collaboration with four banks. This decision opens up new avenues for Paytm to expand its services and offerings within the digital payments ecosystem.
  
  
• The Indian government has suspended Radhashyam Mahapatro, a director at National Aluminium Company Limited (NALCO), citing disciplinary reasons. This decision comes amidst an internal investigation into alleged misconduct by Mahapatro. NALCO, a major player in the metals and mining industry, will likely undergo organizational changes following this development.
  
  
• Larsen & Toubro (L&T) has secured a significant gas pipeline project in the Middle East, marking a major win for the company in the region's energy sector. The project, awarded by a leading oil and gas company, involves the construction of a substantial pipeline network. `This development underscores L&T's growing presence and capabilities in the Middle Eastern market, further enhancing its position as a key player in the global energy industry.

Stock name: IDBI Bank Ltd.

Pattern: Double top pattern

Time frame: Daily

Observation:

Since March 2023, the stock has shown an upward trend. Between January and March 2024, it stabilized, forming a double top pattern on its daily chart. The breakout from this pattern occurred on March 13, 2024, accompanied by above-average trading volume. Presently, the stock's RSI levels are low. Technical analysis suggests that if the breakout momentum persists, the stock may continue to decline.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: KRBL Ltd.

Pattern: Head and shoulder pattern

Time frame: Weekly

Observation:

Starting from February 2022, the stock displayed an upward trend. Between April 2023 and February 2024, it formed a head and shoulders pattern on its weekly chart. In February 2024, the stock broke out from this pattern, coinciding with a bearish signal on the MACD indicator. Since then, it has experienced a persistent decline, with the current RSI at an extremely low level. According to technical analysis, if the current momentum persists, the stock may further descend.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• Reliance Industries has purchased Paramount Global's 13.01% stake in Viacom 18 Media for about Rs. 4,286 crore, increasing its equity to 70.49%. This move strengthens Reliance's foothold in India's media industry, following its merger with Star India and upcoming collaboration with Walt Disney. The acquisition underscores Reliance's strategic vision to dominate both traditional television broadcasting and digital streaming services in India.
  
  
• Tata Motors announces plans to construct a new manufacturing plant in Tamil Nadu with an investment of Rs. 9,000 crore. This move aims to enhance production capacity and cater to growing demand in the automotive sector. The plant is expected to generate numerous job opportunities and further bolster Tata Motors' presence in India's automobile industry.
  
  
• A new scheme has been unveiled to incentivize the sale of electric two-wheelers and three-wheelers in India. This initiative aims to accelerate the adoption of electric vehicles and reduce reliance on traditional fuel-powered vehicles. Under the scheme, financial incentives will be provided to buyers of electric two-wheelers and three-wheelers, encouraging consumers to switch to eco-friendly alternatives. This scheme is valid for four months from April 1 onwards.

Stock name: Mahindra Holidays & Resorts India Ltd.

Pattern: Double top pattern

Time frame: Daily

Observation:

Initially, the stock exhibited an upward trend. Nevertheless, it consolidated, forming a double top pattern on the daily chart from January to March 2024. A breakout from this pattern occurred on March 12, 2024, accompanied by average trading volume. Presently, the stock's Relative Strength Index (RSI) indicates low levels. According to technical analysis, continued momentum from the breakout may potentially drive the stock further downward.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: KSB Ltd.

Pattern: Head and shoulder pattern

Time frame: Daily

Observation:

Overall trend of the stock has remained in the upward direction. Between January-March 2024 period, the stock's trajectory has stabilized and notably exhibited a head and shoulders pattern on its daily chart. On March 11, 2024, the stock successfully broke out from this pattern, accompanied by higher than usual trading volume. Subsequently, it has been descending, along with a decrease in the Relative Strength Index (RSI). Given this trend, technical analysis suggests that the stock may further decline if current momentum persists.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• SEBI seeks explanation from rating agencies for their delay in responding to RBI's restrictions on IIFL Finance and JM Finance Product. Despite the bans on new gold loans and business activities, rating agencies took no action until March 11. SEBI demands a written explanation by Wednesday, expressing dissatisfaction with the agencies' inaction.
  
  
• Nykaa-KK Beauty, a joint venture involving Bollywood actress Katrina Kaif, Nykaa, and Matrix India Entertainment, is set to intensify its international expansion efforts, focusing notably on the Gulf region. Kaif revealed plans for an extensive rollout over the next year, following their recent launch in Dubai. Additionally, the company aims to bolster its offline presence in India as part of its growth strategy, leveraging the remarkable sales growth witnessed through retail outlets.
  
  
• Tata Power Solar Systems Limited (TPSSL), a subsidiary of Tata Power Renewable Energy Limited (TPREL), has achieved a milestone by completing India's largest Solar and Battery Energy Storage Systems (BESS) project in Rajnandgaon, Chhattisgarh. The project includes a 100 MW Solar PV Project along with a 120 MWh Utility Scale Battery Energy Storage System (BESS). TPSSL secured this significant Rs 945 crore project from SECI in December 2021, managing all aspects from engineering to construction and commissioning.

Stock name: Rainbow Childrens Medicare Ltd.

Pattern: Double top pattern

Time frame: Daily

Observation:

While the stock has generally shown a positive trend, between December 2023 and March 2024, it formed a double top pattern on the daily chart. The breakout from this pattern occurred on March 5, 2024, backed by average trading volume and a bearish MACD indicator. Subsequent to the breakout, the stock is trending downward, accompanied by a low RSI. Technical analysis suggests that if the current momentum persists, the stock may experience further downward movement.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: NATCO Pharma Ltd.

Pattern: Cup and handle pattern and retest

Time frame: Weekly

Observation:

Between January 2022 and February 2024, the stock displayed a cup and handle pattern on its weekly chart. In February 2024, a significant breakout candle with substantial trading volume occurred. The MACD indicator also signalled positively. Following the breakout, a slight retest took place, lowering the RSI to a favourable level. Technical analysis suggests that a successful rebound from this retest may lead to additional upward movement for the stock.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• SpiceJet's Chief Commercial Officer and several team members resigned as part of the airline's restructuring plan. Despite the company's commitment to growth, its shares plummeted up to 10%. The airline, facing financial challenges, plans significant layoffs amid a recent Rs 1,000 crore fund raise.
  
  
• L&T Finance, L&T Infra Credit, and five other NBFCs surrendered their certificates of registration to the RBI, resulting in the cancellation of their legal status. The move followed L&T Finance Holdings' merger of subsidiaries last December. Additionally, the RBI cancelled CoRs for four other NBFCs—Nimisha Finance India, R.M.B. Finance Company, Suyash Finovest, and Kamdhar Leasing and Finance Ltd.
  
  
• Aditya Birla Capital and Aditya Birla Finance have greenlit a Scheme of Amalgamation to form a consolidated NBFC, streamlining their structure and complying with RBI regulations. This transformation, pending regulatory approval, will convert Aditya Birla Capital from a holding company to an operational NBFC.

Stock name: Mahindra Lifespace Developers Ltd.

Pattern: Cup and handle pattern and retest

Time frame: Weekly

Observation:

The stock has maintained an overall upward trend, showcasing a cup and handle pattern on its weekly chart from September 2022 to February 2024. February 2024 witnessed a noteworthy breakout from this pattern, supported by an above-average trading volume. Following the breakout, the stock underwent a substantial retest, dipping below its breakout level. Presently, the stock's RSI has cooled down to a favourable level. According to technical analysis, a successful rebound from the retest with adequate momentum may drive the stock to continue its upward trajectory.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: NCC Ltd.

Pattern: Rounding bottom pattern

Time frame: Monthly

Observation:

Between January 2008 and February 2024, a rounding bottom pattern emerged on the stock's monthly chart. February 2024 marked a significant breakthrough from this pattern, backed by a higher-than-average trading volume. Presently, the stock's RSI levels indicate it is deeply in the overbought zone, suggesting a potential price retest. According to technical analysis, sustaining the breakout momentum may propel the stock to continue its upward trajectory.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• The Adani Group plans to invest ₹60,000 crore in its airport business over the next decade, excluding the ₹18,000 crore already invested in the Navi Mumbai airport's first phase. The focus is on enhancing infrastructure, including runways, terminals, and city-side amenities. The investment will be funded internally, aiming to transform the airports into major international hubs. Once profitable, the group intends to list the airport business. The goal is to cater to 250-300 million passengers by 2040, up from the current 73 million across seven operational airports.
  
  
• Tata Chemicals shares plunged 10% as Tata Group's decision to avoid Tata Sons IPO dampened market enthusiasm. Tata Investment Corporation also saw a 5% decline after a recent 28% surge. Tata Chemicals, once a potential beneficiary of Tata Sons' listing, is now in the F&O ban list. Other Tata group stocks, including Tata Consumer, Tata Steel, Tata Motors, and Indian Hotels, also faced cuts amid the overall market downturn.
  
  
• HDFC Bank is gearing up for the IPO of its subsidiary (NBFC arm), HDB Financial Services, set to be one of the major public issues in 2024. The IPO, the first from the HDFC Group post the HDFC Bank and HDFC merger, is anticipated in late 2024 or early 2025. HDFC Bank has reached out to top investment banks for the process.

Where a company is holding a large chunk of investments in other companies and it's not having any material Business operations of its own, is called a "Holding Company" A holding company typically does not have its own business operations other than the retention and management of assets in anticipation of future sale or trade or may be as a tool of corporate restructuring. The Holding Company thus derives its income primarily through the return on the assets held for investment purpose. In most cases, income of a Holding Company is only the Dividends received by it's from the investments made in other companies.

Most companies are valued by discounting their future earnings. However, if we look at the income source of the holding companies, it is typically, dividend income declared by their portfolio companies.

There are two ways to look at value of a holding company-

• Value based on Income: As the Income of a holding Company may be negligible when compared to the Value of its underlining Assets i,e. investments, it doesn’t make sense to value it based on Income
• Value based on Assets: The real asset of the holding company is their stake in the portfolio companies and therefore the better way to value these companies will be through the investment value route. Thus, the value of a holding company needs to be based on the assets it holds i.e. based on the value of its subsidiary companies.

Now, you must be thinking…it will be pretty simple to value such companies, we just have to take the aggregate value of the portfolio companies, but.. there is something called the holding discount which has to be factored in.

Why is such a discount even considered?

• Liquidation discount

As such the value of Holding Company is based on the sum values of its subsidiaries. However, liquidation discount is generally provided for built in or embedded capital gains even when no liquidation is planned, more so as far as the value if assets of the subsidiary to pass to the Holding Company, it must pay taxes. Holding period, rate of tax may determine this discount.

• Discount for lack of control:

The Holding company value also gets discounted on account of lack of control, for example a Holding company holds 100% stake in a subsidiary & a Holding company holds 15% stake in a company both have different value preposition i.e. the one in which 100% stake is held have a controlling value and the one in which 15% is held shall not command that much proportionate value. Often discount for lack of control on subsidiaries is applied. The less % of holding, the more the discount & vice versa.

• Discount for Lack of Marketability:

Due to separate legal entity often more restrictions exists upon transfer of assets of subsidiary company by Holding Company which leads to discount for Lack of Marketability in the hands of the Holding company.

It's been generally observed that a discount in the range of 40 to 60% on the NAV of the portfolio of the holding companies is applied. But adjustments should be made to the discount depending on the dividends paid and received by the holding company and also expected future scenario of the company. The type of investments the holding company holds also has an impact on the discount that should be applicable for holding company in question. It may also be stated that reorganization of Holding Company may also result in Value Creation.

Some of the Indian listed Holding companies are Bajaj Holdings & Investment Limited, Tata Investment Corporation Limited, Kama Holdings Ltd etc.

Now, coming after understanding what is a holding company and why does it trade at discount, we move to the recent rally of Tata Chemicals, where the sudden and sharp rally can be attributed to its 2.5% stake in Tata Sons. Reports suggest that Tata Sons could achieve a market valuation of ₹ 11 lakh crore, valuing Tata Chemicals' 2.5% holding at approximately ₹19,850 crore, which is close to 60% of its current market capitalization of ₹33,520 crore.

To understand more about such interesting concepts along with further interesting examples, check out my course on Fundamental Analysis.

Until next time !!!

Stock name: Jubilant Foodworks Ltd.

Pattern: Head and shoulders pattern and retest

Time frame: Daily

Observation:

The stock exhibited a positive trend since March 2023. From September 2023 to February 2024, it has formed a head and shoulder pattern on the daily chart. A breakout occurred on February 29, 2024, accompanied by significant trading volume and a bearish MACD indicator. Following the breakout, the stock underwent an initial retest of levels, and currently, it is on a downward trajectory with a low RSI. Based on technical analysis, the stock might continue its descent if the current momentum persists.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

Stock name: HDFC Life Insurance Company Ltd.

Pattern: Double bottom pattern

Time frame: Daily

Observation:

Since December 2023, the stock has been experiencing a decline. However, between January 23, 2024, and March 04, 2024, it stabilized and established a double bottom pattern on its daily chart. A breakout from this pattern occurred on March 04, 2024, accompanied by substantial trading volume. The RSI levels of the stock are also in a favourable range. According to technical analysis, if the stock sustains the breakout momentum, it may see an upward movement.

You may add this to your watch list to understand further price action.

Disclaimer: This analysis is purely for educational purpose and does not contain any recommendation. Please consult your financial advisor before taking any financial decision.

News for the day:

• Mahindra & Mahindra's promoter group entity, Prudential Management and Services Pvt Ltd (PMSL), is selling shares through Kotak Securities to address specific liquidity needs. The sale will decrease PMSL's holding and reduce the overall promoters' stake in the company from 19.32% to 18.57%. The move aims to meet the family's liquidity requirements, as clarified by the company in response to news reports on the share sale.
  
  
• IIFL Finance is securing a $200 million liquidity boost from top shareholder Fairfax India after the RBI banned its gold loan disbursals, causing liquidity concerns. Fairfax India, holding 15%, expresses confidence in IIFL's management. The RBI's directive led to a 36% share price drop, prompting the liquidity support. IIFL Finance is committed to compliance, with the RBI set to review after a special audit and rectifications.
  
  
• Indian Oil Corporation (IOC) plans to be the first Indian company to produce Formula One (F1) fuel, with 'Storm - Ultimate Racing Fuel' unveiled for the FIM Asia Road Racing Championship. IOC aims to manufacture F1-grade fuel within three months, expressing ambitions to enter the high-performance racing sector. The specialized fuel meets FIM Category 2 race fuel requirements and emphasizes IOC's interest in providing for F1 teams with flexible fuel supplier options.