With most of the sectors trading above their short term averages, adverse news from Europe pulled the Nifty down on Friday, 10 June. While the Nifty had been hovering around the 8,200 levels for most part of the session, profit booking and weekend pressure dragged the indices down. The Sensex fell 127 points to 26,635 while the Nifty slipped 33 points to close in the red at 8,170 levels. As reported last week in our column, many brokerages have been upping their yearend targets for the Indian markets. Not surprisingly, Ambit Capital which was predicting the Sensex to fall to 22,000 levels has now set the FY 17 yearend target at 29,500. This revision has come on the back of fire fighting by the RBI and expectation of a good monsoon and earnings finally turning around. Even though FII’s have remained buyers in the F&O segment, the Nifty is likely to remain under pressure next week because of the coming US Fed meeting. Still market men could use this opportunity to buy at lower levels or create long positions. Short-term traders can buy the Escorts stock currently quoting at Rs 176 as despite the weakness in the broader index, it has managed to sustain on a higher note. While tractor sales have been slow for the past two years due to drought situation in the country, this year a favourable monsoon can create a smart uptick in tractor sales. The Escorts stock can give a 12-15% price appreciation in the next 90 days. Bayer CropSciences India Ltd was incorporated in 1958 in Mumbai and is part of Bayer AG Germany and a true multinational company to boot. It is a premier organisation in the world in the area of crop science, seed technology and non agricultural pest control. The company has launched three agrochem products in 2015 and proposes to launch a hybrid cotton seed in FY17. All the new launches will drive topline growth over the next few years and show strong growth opportunities in the domestic market. Bayer CS has reiterated its focus on growing its India business in both agro chemicals and seeds. It has an extremely light asset business model as it does not own any manufacturing facility in the country but outsources most of its products from vendors. Based on present valuations, Bayer CS looks fairly valued as the short term outlook has been subdued on the back of low farmer income, commodity prices and reservoir levels. Scanty rainfall in the country has also put pressure on margins. However, long term growth prospects of the industry and of the company in general is extremely positive anchored by its comprehensive distribution network , branded portfolio , launch of innovative products and parent Bayer AG research and development muscle. Return of capital to shareholders or buyback offer in October 2015 elicited a good response with twelve lakh sixty five thousand shares of Rs 10 face value were bought back at a price of Rs 4,000 per equity share. The total amount utilised in the buyback offer is Rs 506 crore. With monsoon expected to be above normal the industry is looking for good times ahead. At present, the Bayer CS stock is quoting at Rs 3,900 on the Indian exchanges and can give a 30% price appreciation in the next one year.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.