Buy Paytm and Whirlpool shares for near-term gains as Nifty enters up-trend, index may head to 16557 By Subash Gangadharan On the Nifty Daily chart, we can observe that after recently touching a low of 15183, the Nifty has bounced back smartly and even taken out the previous swing high of 15863. The Nifty then corrected marginally, before again breaking out of the recent highs and convincingly closing above the 20-day SMA. This is a positive signal for the near term. The Nifty could now be headed towards the 50-day SMA at 16140 in the near term. A close above 16140 could take the Nifty even higher towards the 200-day EMA currently at 16557. Buy Whirlpool Whirlpool has been rallying higher for the last few weeks after finding support around the 1400 levels. On Wednesday, the stock broke out of a consolidation range on the back of healthy volumes. Technical indicators are giving positive signals as the stock is trading above the 20 and 50-day SMA and momentum readings like the 14-week RSI are in rising mode. With the intermediate technical setup too looking positive, we believe the stock has the potential to move higher in the coming weeks and therefore recommend a buy between the 1608-1612 levels. CMP is 1610.25. Stop-loss is at 1540 while the target is at 1720. Buy Paytm Paytm has shown relative strength this week. While the Nifty index has gained 1.61% this week, Paytm has gained 5.33% over the same time period. Zooming into the daily chart, we can observe that the stock has bounced back from the 20 day SMA after a recent correction. With the uptrend intact, it indicates that the stock is ready to climb higher. Daily momentum indicators like the 14-day RSI too are in rising mode and not overbought, which augurs well for the short-term uptrend to continue. We, therefore, believe the stock has the potential to move higher and take out its previous intermediate highs in the coming weeks. We recommend a buy between the 690-694 levels. CMP is 692. Stop-loss is at 640 while the target is at 770. (Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
Services miss estimates; Software better than expected: Services business grew 0.6% q-o-q cc and missed HCLT’s Q3FY23 guidance, mainly due to a 3.8% q-o-q cc decline in the ER&D segment. Growth in the IT&BS segment moderated slightly to 1.6% q-o-qcc but was in line with estimates. BFSI and Life Sciences were the key growth drivers, while communications were the drag among verticals. Growth was led by the Americas region, while Europe and ROW posted declines.
Decline in bookings reflects delays in decision-making: HCLT won 10 large deals in services and three large deals in Software with net-new deal TCV of $2.1bn, down 8% y-o-y. Deal wins were driven by the services portfolio, were centered on cost optimisation and vendor consolidation and came mainly from BFSI, manufacturing and Life Sciences verticals. Management highlighted a ramp-down in discretionary spending in Hitech and communications verticals but pointed to a strong deal pipeline.
FY24 guidance in line with expectations: HCLT has guided for 6-8% y-o-y growth for overall business and 6.5-8.5% y-o-y cc growth in services segment and 18-19% margins in FY24—all in line with our assumptions. We maintain our FY24-25 cc revenue growth and margin estimates and expect HCLT to deliver 6.5% cc revenue growth and 18.4% margins in FY24. However, we lower our earnings forecasts by 2% to factor the higher tax rate indicated by the management.
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Raise PT: HCLT has fared better in Q4, particularly in North America and BFSI, unlike its peers. However, rising demand uncertainty as a US recession nears remains a concern. HCLT’s stock at CMP trades at 17x PE and offers a 5% yield, which in our view should limit downsides and derating. Hence, we raise our target PE to 17x (16x earlier) and raise our PT to Rs 1,125, offering 8% potential upside.