Despite the unexpected news of an interest rate cut by China on Monday, the Indian Stock market continued its downward journey during the week with five consecutive negative closing. Most of the sectors were in correcting mode and closed lower during the course of five trading sessions. The October future and option series expiry also saw participation among traders on the lower side along with a fair bit of volatility. Since, the election verdict of Bihar is expected on 8 November, volatility has risen and most market men would prefer to take their bets off the table for now. The stock market looks like a sell on rise during the next week of trading with low volumes and in negative terrain. Apollo Hospitals Group is Asia’s largest and most trusted healthcare chain with over 9,000 beds across 64 hospitals, 2,475 pharmacies, health insurance services, an academic institution and a research foundation with a focus on clinical trials and genetic research. During the last five years, the company has grown at a CAGR of 15% and analysts expect it to grow on a similar growth path in the next few years with a strategy to strengthen the dominance in the existing clusters while ramping up volume and operations in the new hospitals. Apollo Hospitals is planning to add another 1350 beds in the near future across six locations and the capital expenditure is proposed to be funded by a mix of internal accruals and a proposed rights issue. The key risks to Apollo Hospital group and sector in general is scarcity of skilled specialised doctors and para medical staff in the country along with the unorganised pharmacies creating competition in the pharmacy business. But the company is taking adequate measures to train new people at its academic institution and open its pharmacy stores at good locations. The share has been a continuous out performer in the stock market and has made new highs in recent weeks and it is quite possible that fresh life time high can be seen in the coming months. The position in the F&O segment also shows that a large part of roll over is on the long side. The company will be announcing its Q2 FY16 financial results on 14 November and most brokers are bullish on the scrip. The stock has been consolidating in the Rs 1,300 range in spite of the market trending downward and investors can safely buy the Apollo Hospital stock for a possible upside target of 15% in the next 12 weeks.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.