Medium Term Call: SKFINDIA

The bearing's giant is the next medium term pick. 

SKF is a leading global supplier of bearings, seals, mechatronics, lubrication systems, and services which include technical support, maintenance and reliability services, engineering consulting and training. SKF is represented in more than 130 countries and has around 15,000 distributor locations worldwide. Annual sales in 2012 were SEK 64,757 million (1SEK, Swidish Krona = INR9.5) and the number of employees was 46,775. www.skf.com
 In India, SKF India Ltd has 3 manufacturing centres catering to Two-wheelers, Automotive, Industrial & Electrical sectors. It is preffered bearings supplier of Maruti, it has received award from Dun & Bradstreet for being Top Indian company in bearing's sector!

SKF has seen huge accumulation by HDFC mutual fund family along with Reliance mutual fund and other likes. The company is debt free and has highest market cap of Rs.3935 Crores amongst its indian peers which translates to highest market share for its products & services. On a face value of 10 the company is giving Rs.7.5 as dividend (Record date 16th to 24th April 2014). The company is expected to showrobust performance with new products catering to Heavy Commercial Vehicle segment like Tractors, cranes trailers etc and also Railways. Current EPS is Rs.31.3 and expected growth of 20% in this year by Dec 2014. With a Price to Earnings ratio of 23x the expected price would be Rs.863 this is 15.5% above current price of 747.
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Technical view:
On weekly basis (medium term outlook) SKFINDIA has broken the downward sloping channel at 550 and since then it has shown strong uptrend current.
It started its 1st wave at 450 finished it at 690 and 2 wave began after that which seems to be completed at 625. The major 3rd wave is in progress. The 3rd wave has wave a, b & c constituted in it out of which 3.a has finished at 780, 3.b should be done around 720s and 3.c which will be too strong should commence from there.
Wave 1 (450 to 690) = 240points
Wave 2 (690 to 625) = 65 points (27% retracement of wave 1)
Wave 3 should ideally be 1.61 times Wave1(minimum) = (240*1.618) = 388+
So from 720-740 zone Wave 3 should see (730+388) = 1118 levels within span of 3-4months from now that is around June -July.
The SL for this setup should be 690. below which the wave counts would re assert and stock might test 625 levels again.

Overall, fundamentally the scrip is in strong hands with FII holding of 15% & DII holding of 17%+, fundamentally 863 is the target while technically the 1100+ is the target expected within 3-4 months. Current market statistics shows 45% of shares traded everyday are accumulated by investors which shows strong base build up at 740s zone.
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