Identifying 2 Bullish Stocks in a Bearish Market While Nifty Falls- HFCL And Morepen Laboratories – Amidst this ever-changing landscape of financial markets, an investor can be well rewarded with identifying stocks which have trended against the general trend. With the Nifty falling, some continue to look resilient in terms of growth in stocks. In this article, we shall discuss two specific stocks- telecommunications and pharmaceutical sectors. These ones have outperformed the market with a bearish environment. We shall see their fundamentals and technical analysis and what makes them stand out in such a backdrop.
Understand the Market Trends
In the sense of the market, before we go into details of stocks, this is where we have to understand. The Nifty index has been in a downtrend-that is, almost speaking of it as a barometer of the Indian stock market. Under such conditions, investors tend to seek stocks that not only defy the negative trend but also have the potential to give high returns.
It also becomes important to identify the right stocks that are performing the best during the sell-off. It is important to note that this can only be achieved using both fundamental analysis and technical analysis, so that investors make the right decisions based on the data rather than emotions.
Stock One: HFCL
We first introduce HFCL, a leading global technology company engaged in the manufacture of optical fibers and optical fiber cables. Besides the optical fiber and optical fiber cable business, the company also provides communication and networking products and solutions to various sectors like telecommunications, defense, and railways.
The company earns almost all the total revenue through revenues generated through the telecommunication industry, which accounts for around 96%. Therefore, HFCL is indeed a large player in the same industry.
The company has experienced strong annual sales growth and hence this is a good sign of financial fitness.
Fundamental Analysis of HFCL
On studying the financial statements, the following have drawn attention towards them:
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- Sales Growth: HFCL has experienced a sustained growth of sales over the years; hence, this is positive growth for investors.
- OPM: The company boasts an OPM of approximately 13%, meaning it is relatively operational.
- Promoter Holding: The extent to which its promoter holding has equity amounts to 37%. This indicates assurance of its prospects.
- Institutional Interest: FIIs have increased stake from 5% to 7% and hence show increased confidence in the stock.
HFCL-Joint Technical Analysis
Technical analysis of HFCL shares shows that price action followed clearly defined uptrend patterns. Making higher highs and higher lows doesn’t just confirm that there is a strong bullish momentum but also this signal is strengthened.
The recent price action exhibited by the stock indicates consolidation at key levels. Of course, this might just be the perfect opportunity to buy and ride out the upward movement the stock is experiencing.
The trend line of the stock looks good at this point in its journey in terms of future performance.
Stock Two: Morepen Laboratories
The second stock that needs to be considered is Morepen Laboratories, the company that has recently witnessed many achievements-the highest EBITDA in 40 years. This is undoubtedly quite good proof of the company’s solid operating performance as well as growth prospects.
Gross revenue of Morphan Laboratories was up by 14% year on year, reflecting its ability to add scale even in rather difficult market circumstances. The company also successfully concluded QIP with a size of 200 crores of equity raise, further strengthening the equity base and bringing in some new institutional investors.
Fundamental Analysis of Morepen Laboratories
Important metrics to note for Morepen Laboratories are that the company’s sales growth has always been positive, meaning the business is growing at a healthy rate.
- Operating Profit Margin: The OPM has been increasing from 9% to an expected 11% thereby representing the operational efficiency.
- Shareholding Pattern: Promoters are holding 35% of the equity which represents confidence in the future of the company.
- Increase in Institutional Stake: FIIs have increased their holding from 1.6% to 7.72% very significantly. DIIs have also increased the stake.
Technical Analysis of Morepen Laboratories
Technically, Morepen Laboratories are continuing on its upward way. Stock has manifested a pattern of consolidation after strong upward movements and bullish sentiments amongst investors.
From the series of breakouts above key resistance levels, it would tend to suggest that the stock is headed on more up moves. Investors are highly recommended to follow the price action of the stock as it appears to respect its trend line and continues upwardly.
Investment Thoughts
Considering these two stocks, it is always essential to note that this is an educational purpose and not at all an action call. The investor should make his or her analysis with full consideration of their financial situation before making an investment in the companies.
There are stocks, like HFCL and Morepen Laboratories, which do not explain this overall bearish trend in the market. These strongly supported combined with positively indicated technical stocks have made them appealing for investors to invest in amidst this tough market scenario.
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Key Takeaways
- HFCL has excellent sales growth going on as a telecom company with high OPM.
- Morepen Laboratories is enjoying good revenue growth and therefore has attracted institutional buyers.
Both stocks are currently in an upward trend, showing resilience against market downturns.
HFCL is a global leader with a strategic thrust on optical fiber and cables. It mainly caters to the telecommunication sector, which amounts to an impressive 96% of its revenues. The company’s fundamentals show consistent growth in sales year on year and that is positive. Notably, OPM is an impressive 13.3%.
Promoter holding is at 37% with foreign institutional investors increasing their stake from 5% to 7%. The chart of the stock reflects a great ascending pattern wherein regular corrections are followed by new highs suggesting a robust performance going forward.
Morepen Laboratories has just reported Earnings Before Interest, Taxes, Depreciation, and Amortization at a historic 40-year high with gross revenue increasing at a healthy 14% YoY. The sequential performance has registered an impressive growth of 93% in margins. The company had already held a successful Qualified Institutional Placement, which helped the company raise 200 crores, thereby taking new institutional investors on board, raising the FII holding from 1.6% to 7.72%.
Much like HFCL, Morepen‘s sales continue to rise steadily with expected OPM pick up from 9% to 11%. The stock shows consistency in its technical chart as it has been showing a strong buy pattern to consolidate and break out smoothly.
Conclusion
Conclusion Though the Nifty index is quite under pressure at the bottom, HFCL and Morepen Laboratories are showing signs of coming out much stronger out from that pressure. That solid fundamentals and technical patterns will bear them huge profits, only time will tell; however, in any case, investors must keep a watchful eye on these and must consider them an important constituent of a diversified investment strategy.
Always remember to do the homework and seek advice from a financial advisor before investing in anything. Be on the update and wise before arriving at making the right investment decision amidst the complexity of stock market.