Maruti Suzuki (MARUTI) (CMP- | 1612) Technical Delivery Call

Technical Delivery Call

November 18, 2013

Maruti Suzuki (MARUTI) Key Technical Data Recommended Price

1620-1600

Price Target

1775

Stoploss

1555

52 Week High

1777

52 Week Low

1215

50 days EMA

1504

200 days EMA

1456

52 Week EMA

1452

Stock Data Market Capitalisation Equity capital

| 45715 crore |151crore

Face value

5.0

MF Holding (%)

15.4

FII Holding (%)

19.7

Analyst Dharmesh Shah [email protected] Dipesh Dagha [email protected]

(CMP- | 1612)

Strategy: Buy Maruti Suzuki in the range of | 1620.00 – 1600.00 for a target of | 1775.00 with a stop loss below | 1555 on a closing basis The share price of Maruti Suzuki remains in a healthy uptrend, forming rising peaks and troughs on the long term time frame charts. The stock hit an all-time high of | 1777 levels in May 2013 and, thereafter, entered a corrective phase driven by profit bookings at the life-time highs. The recent developments on the price charts signal an end of the four month corrective phase and, therefore, provide fresh entry opportunity to ride the next up leg. Key technical observations • The corrective price decline from the life-time high of | 1777 saw the stock take support precisely at the 61.8% Fibonacci retracement of the major rally from December 2011 low of | 900 to the life-time high of | 1777 levels placed around |1230 odd levels • At the August and September 2013 lows of | 1215 and | 1233, respectively, the stock retested its major long term rising trend line, which has been in place since 2003. The share price bounced back from the long term rising trend line and key Fibonacci retracement support region, thereby maintaining a rising peak and trough sequence on the long term time frame charts • The most important observation on the price charts is that the corrective price action from July 2013 till date has taken the form of a rounding pattern as highlighted in the adjoining daily candlestick chart. The stock registered a breakout above the neckline of this rounding pattern (| 1565) with a strong bullish gap area formed between | 1565 and 1529 towards late October 2013. The rounding pattern breakout accompanied by a strong bullish gap represents a radical shift of momentum in favour of bulls. It signals an end of the corrective phase and resumption of the preceding uptrend • The share price revisiting the breakout area (|1565) in last week’s trade once again garnered good buying support precisely near the bullish gap area (1565–1529) formed on October 29, 2013. This further emphasises the importance of the change of polarity principle, which states that a significant resistance once taken out, reverses its role as a support for future price action. The stock also tested its 21 day EMA (1569), which has acted as an intermediate support providing cushion to the corrective declines since September 2013 • Among oscillators, the 14 period RSI remains in a rising trajectory with a bullish reading of 64 indicating strength in the price breakout. The short term stochastic (5/3/3) has turned northwards after generating a positive crossover from oversold territory and indicates continuation of bullish momentum in the short term Conclusion: Following the rounding pattern breakout we believe the share price is set to resume its uptrend and challenge its all-time highs placed around 1777 in the medium-term. Therefore, it provides a good entry opportunity to ride the up-leg

ICICI Securities Ltd. | Retail Equity Research

Exhibit 1: Maruti

Suzuki – Daily Candlestick Chart

Source: Spider software, ICICIdirect.com Research


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NOTES: •

It is recommended to enter in a staggered manner within the prescribed range provided in the report

•

Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the report

•

The recommendations are valid for three to six months and in case we intend to carry forward the position, it will be communicated through separate mail.

Trading Portfolio allocation •

It is recommended to spread out the trading corpus in a proportionate manner between the various technical research products

•

Please avoid allocating the entire trading corpus to a single stock or a single product segment

•

Within each product segment it is advisable to allocate equal amount to each recommendation

•

For example: The ‘Daily Calls’ product carries 3 to 4 intraday recommendations. It is advisable to allocate equal amount to each recommendation


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Recommended product wise trading portfolio allocation

Products

Allocations Product wise Max allocation allocation in 1 stock

Return Objective Number of Calls

Frontline Stocks

Mid-cap stocks

Duration

Daily Calls

8%

2-3%

3-4 Stocks

0.50-1%

2-3%

Intraday

Short term Delivery

6%

3-5%

7-10 p.m

4-5%

7-10%

Opportunity based

Weekly Calls

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Weekly Technical

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Monthly Call

15%

5%

2-3 Stocks

7-10%

10-15%

1 Month

Monthly Technical

15%

2-4%

5-8 Stocks

7-10%

10-15%

1 Month

Techno Funda

15%

5-10%

1-2 Stocks

10% and above

15% and above

6 Months

Technical Breakout

15%

5-10%

1-2 Stocks

10% and above

15% and above

3-6 Months

Cash in Hand

10%

-

-

-

-

-

100%


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Pankaj Pandey

Head – Research

[email protected]

ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC Andheri (East) Mumbai – 400 093 [email protected]

Disclaimer The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Ltd (I-Sec). The author may be holding a small number of shares/position in the above-referred companies as on date of release of this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of release of this report. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This report may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. I-Sec may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.


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