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In the domestic markets, Sensex and Nifty were down 4.15% and 4.48%, respectively, for the past week. Having breached the lows of the year 2011 a couple of weeks ago, the Nifty has further slipped over fears of another rate hike by the Reserve Bank of India (RBI) in its Sept 16th policy meeting.
With inflation at 9.22% (m-o-m), there are growing concerns that the RBI could go for another rate hike of 25 basis points in its next policy meeting. This can affect the credit growth of banks as companies could postpone their capex plans further, thereby impacting the banking sector as well as capital-intensive companies.
Banking stocks bore the brunt of these concerns and the BSE Banking index dropped 7.5% for the week. Similarly, the effect of concerns on Europe debt and the US economy saw the BSE IT index slipped 5.3% for the week.
Here is analysts' take on a list of 10 stocks which have hit their 52-week low this past week.
1) Infosys Technologies
Technology major, Infosys Ltd, slipped to its 52-week low on Friday while the 10-member BSE IT index tumbled 4.4% to 4804.87. The BSE IT Index lost about a fifth of its value in about a month since the debate about US defaulting on debt intensified.
India's showcase $76 billion software and services sector, which has already been reeling under competitive pressure and sluggish demand, gets more than three-fourths of its revenue from overseas countries like United States and Europe which are at the top of the list.
IT stocks in general have been penalized post the US credit rating downgrade with fears of possible slowdown hurting the Indian IT demand environment. And most of us now have started comparing the present scenario with the post-Lehman downfall in 2008.
"CY2011 is different from CY2008 as the surging debt of the US government is not a direct concern to Indian IT sector", according to a report by Angel Broking.
Shares in Infosys Ltd touched their 52-week low of Rs 2,172.6 on BSE, before recovering to close at Rs 2,225.40. For the year the stock has tumbled over 20 per cent.
"The stock has a strong technical support at Rs 2,050 and should take support at these levels", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
The annual analyst day of Infosys highlighted the management maintaining its cautious stance on the current macro environment owing to the elevated levels of uncertainties in the USA and the euro zone.
"The management has not seen any cancellation or budget cuts in the clients' accounts in the recent months and believes that this phase is also temporary as newer technologies will evolve and support investments in IT in the long term", according to a research report by Sharekhan Ltd.
The report further adds -- The company target to generate one-third of its total revenue each from the consulting & system integration (SI); business & IT services; and products, platforms & solutions (PPS) verticals.
In the near term, macro headwinds are likely to continue to make headlines, which could possibly result in further correction in the stock price going forward.
Nevertheless, we believe the recent fall has provided a good opportunity to enter the stock with an attractive risk-reward profile for the next 12-18 months, said the report.
Sharekhan Ltd maintains a 'BUY' rating on Infosys Ltd with a price target of Rs 3,358. However, in a bear-case scenario with a sub-optimal earnings growth of 5% assumed in FY2013 (similar to the earnings growth seen in FY2010), we would get a price target of Rs2,347.
"At ~15x FY2013 stocks Infosys is trading at compelling valuations and we continue to be cautiously positive on the sector and maintain a 'BUY' rating on the stock", according to a report by Angel Broking.
2) State Bank of India
Country's largest bank, State Bank of India has slipped to its 52-week low of Rs 2,026.10 on Friday (19th August, 2011) on Bombay Stock Exchange.
The BSE Banking index slipped nearly 20% for the year. The index saw recent correction on the back of deepening worries about a slowdown of the global economy and a possible return of the recession in the US.
On Friday (19th August, 2011), Credit Suisse has cut its target price of the State Bank of India to Rs 2,180 from Rs 2,483.07, but has maintained its 'NEUTRAL' rating on the stock as it expects profitability to continue to be under pressure for the country's largest lender.
"Post 1Q earnings miss and a slowdown in fees, higher tax rate and treasury loss, we reduce our FY12 and FY13 earnings per share estimate by 13 percent and 4 percent respectively," Credit Suisse said in a note on Friday.
"Daily chart shows short term support at 2,000, and a long term support at 1,700 levels", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
"For 1QFY2012, SBI's standalone net profit declined by 45.7% y-o-y due to higher NPA as well as investment provisioning burden. Results on the Profit before tax (PBT) level were ~14% above our estimates; however, the bottom line was dented by high effective tax rate of 48.7%", according to a brokerage report by Angel Broking.
The brokerage said the present valuation provides a good entry point considering the earnings growth outlook (expect a 42% EPS CAGR over FY2011-13) is strong due to lower regulatory provisioning burden, going forward. Hence, we maintain our 'BUY' recommendation on the stock with a target price of Rs2,753
3) Tata Motors Ltd
Shares in Tata Motors Ltd touched their 52-week low of Rs 703.25 on the Bombay stock Exchange while for the year the scrip has plunged over 40%. It has corrected nearly 11% in this past week. The stock has been under some pressure recently. The net profit of the company stood flat at Rs 2,000 crore (10.2% lower than estimates), led by margin pressures, high interest cost as well as higher tax rate particularly at JLR.
"The long term support of Tata Motors Ltd is seen at Rs 650 while the major resistance level is seen at Rs 850", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
According to a recent data, Tata Motors said its global sales stood at 85,392 units in July, down six per cent as compared to the same month last year. Sales of luxury brands from Jaguar Land Rover were flat at 19,119 vehicles in July, Tata Motors said in a statement.
On Friday, (19th August, 2011), Goldman Sachs has cuts the target price of Tata Motors to Rs 774 from Rs 1,073 citing lower revenue growth outlook amid high local interest rates and global uncertainties.
"We are revising our FY12-14E EPS (earnings per share) estimates on Tata Motors by 12-14 percent mainly on lower revenue assumptions," the Wall Street bank said in a note on Friday.
It has maintained its 'NEUTRAL' rating on the stock, adding that it did not view the recent correction as an attractive opportunity to buy the stock as "valuation appears in-line with global auto peers on relative returns based analysis", the brokerage report said.
4) Tata Power Company Ltd.
The leading power utility company, Tata Power, slipped to its 52-week low of Rs 1,021 on the Bombay Stock Exchange on Friday. The stock has dropped over 20% so far in this year.
Although the company posted a 5% rise in profit after tax at Rs 281.56 crore in the first three months of current fiscal, the stock has plunged nearly 11% post its quarterly results that were declared on 10th August.
"The stock has come out of a long range of Rs 1150-1500, indicating a probable increase in selling pressure in coming few weeks", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
5) ICICI Bank Ltd
ICICI Bank Ltd, the nation's second largest bank, slipped to its 52-week low of Rs 825 on the Bombay Stock Exchange while for the year the stock has plunged over 27%.
"The mid-caps obviously get more of a beating but key levels have been broken on even large banks, something like ICICI Bank Ltd which has broken its key level of Rs 900", says Ashwani Gujral of ashwanigujral. com.
"ICICI Bank's fall has been slow, indicating we might see further weakness in the stock", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
"The larger bank cannot fall by 50% but all banks will decline and the banking sector as a whole is yet to take its big hit. Bank Nifty will reach closer to levels of 8,500. ", added Ashwani.
6) Reliance Industries Ltd
The oil and petrochemicals giant, Reliance Industries Ltd, slipped to its 52-week low of Rs 721.60 on Friday, while for the year the stock has dropped by over 30%.
The stock has been declining since past few days on account of general decline in the Indian stock market. Lower-than-expected production from KG basin has been another overhang on the stock.
Nevertheless, RIL's extant businesses (refining and petrochemical) continued to perform well. "We expect the company to report robust refining margins in the coming quarters as FCCU (Fluid Catalytic Cracker unit) of DTA Refinery has started", according to a note by Angel Broking
"RIL has broken its 2 year range on the downside and the stock looks weak now", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities. "The stock could touch see further declines and could touch levels of Rs 680", added Kunal.
"On the petrochemical side, we do not expect margins to fall below the current level. However, there are some concerns on the KG basin gas output", added the note from Angel Broking.
7) JSW Steel Ltd
Shares in JSW Steel Ltd hit their 52-week low of Rs 623.80 on the Bombay Stock Exchange while for the year the stock has plunged over 40%.
"JSW Steel Ltd has declined on account of mining mess in Karnataka. Low availability of ore for running its blast furnace and higher costs of raw material would remain as a concern for the time being", according to a report by Angel Broking.
The note further adds - The brokerage maintains a 'NEUTRAL' rating on the stock.
"JSW Steel is one of the weakest stock in metal space and further downside of another 5-10% could be possible", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
8) Tata Steel Ltd
Shares in Tata Steel Ltd hit their 52-week low of Rs 450.25 on the Bombay Stock Exchange while for the year the stock has plunged over 30%.
"This stock has been a relative outperformer in the metal sector and should bottom out first", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
"The recent correction in Tata Steel offers a good opportunity for long term investors to buy the stock, as the valuations looks inexpensive", according to a report by Angel Broking.
The note further adds - The Brownfield expansion is operating at its high-margin which should drive strong earnings growth over FY11-14. The Orissa project should de-risk earnings from its European operations over the next 5 years. The brokerage maintains 'BUY' on the stock with a target price of Rs 614. 9) HCL Technologies Ltd
Shares in HCL Technologies have hit their 52-week low of Rs 365.75 on Friday on the Bombay Stock Exchange while for the year the stock has plunged by 14%.
The BSE IT Index lost about a fifth of its value in about a month since the debate about US defaulting on debt intensified.
IT stocks in general have been penalized post the US credit rating downgrade with fears of possible slowdown hurting the Indian IT demand environment. And most of us now have started comparing the present scenario with the post-Lehman downfall in 2008.
"CY2011 is different from CY2008 as the surging debt of the US government is not a direct concern to Indian IT sector", according to a report by Angel Broking.
"HCL Technologies is one of the strong stocks in the IT pack however the fall has intensified in last few months. Support for the counter is seen at Rs 350-365 levels", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
HCL Technologies Ltd
Shares in HCL Technologies have hit their 52-week low of Rs 365.75 on Friday on the Bombay Stock Exchange while for the year the stock has plunged by 14%.
The BSE IT Index lost about a fifth of its value in about a month since the debate about US defaulting on debt intensified.
IT stocks in general have been penalized post the US credit rating downgrade with fears of possible slowdown hurting the Indian IT demand environment. And most of us now have started comparing the present scenario with the post-Lehman downfall in 2008.
"CY2011 is different from CY2008 as the surging debt of the US government is not a direct concern to Indian IT sector", according to a report by Angel Broking.
"HCL Technologies is one of the strong stocks in the IT pack however the fall has intensified in last few months. Support for the counter is seen at Rs 350-365 levels", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
10) Wipro Ltd
Shares in Wipro Ltd have hit their 52-week low of Rs 310.20 on Friday on the Bombay Stock Exchange while for the year the stock has plunged over 30%.
According to a note by Angel Broking -- We continue to be cautiously positive on the IT sector and maintain a 'BUY' rating on the blue chip tech stocks with preference for TCS & HCL Tech followed by Infosys. Wipro Ltd has its own internal set of challenges and has been a consistent underperformer in terms of financials hence we prefer the above stories over WIPRO.
"The pace of the fall of Wipro Ltd has been very slow, indicating further weakness in the stock", said Kunal Bothra, Senior Technical Analyst, Manager Advisory, LKP Securities.
