
Prime Stock: Moving this stock from BUY to SELL
Recent regulatory developments have prompted us to issue a SELL call on this Prime Stock.

Recent regulatory developments have prompted us to issue a SELL call on this Prime Stock.

Consumer durables is a category that stands between staples and lifestyle goods. This category has been hit on one hand by Covid-led lockdowns, and on the other by inflation eating into margins and hurting demand. The category has seen a more severe impact as it is neither buoyed by the non-discretionary nature of staples nor by the quick demand rebound that lifestyle consumption tends to see.

Apart from corporate capex, production linked incentive (PLI) of the government and China-plus-one strategy, the manufacturing space is also undergoing a transition. Companies that have already invested or are now investing to meet the above demand triggers are readying themselves for future growth. This capital goods stock is one such superior player.

Consumer durables bore the brunt of Covid-induced lockdowns. However, with input prices cooling off & improvements in the demand scenario, we think you can play the revival in the sector with this Prime stock.

In the previous update that we published on the possible levels for the Nifty 50, we expected a retest of June lows. This, however, did not play out. Contrary to expectations, the index marched higher, a gain that even managed to break the then-mentioned upper reference level 16,800. Interestingly, the downside trigger level of 15,350 was not even challenged!

The stock has corrected 15% since our recommendation. We initiated our call just a day before the Q4FY22 results when the industry scenario was getting significantly better for the General Insurance companies post Covid.

Manufacturing is the new favourite keyword in the market. If you have noticed the narratives of many money managers as well as the portfolios of funds, you will find that the manufacturing space is gaining favour.

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In the previous update on the Nifty 50 index, we had mentioned that the Nifty 50 index could retest or drop below the March low of 15,700. Since then, this scenario played out; the Nifty 50 dropped to a low of 15,183 on June 17 and has since been on a recovery path. Many of you have asked us where the Nifty 50 stands now. Here’s the view as the charts show.

As per the above table, we are not yet in a bear market, though it would seem to be just round the corner. But what the data shows is that the period taken to recover from the onset of a bear market back to regaining the previous peaks can be as short as three months or as long as 74 months.

The PrimeInvestor Auto++ smallcase puts together auto companies, auto component players, and other diversified companies that are involved in the design and technology transformations unfolding in the industry.
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