With a 70% gain, HDFC AMC emerges as the top wealth creator in 2019; should you buy now? | Ethical Research

Analysts advise investors to put fresh money in the counter at current levels as the risk-to-reward might not be that favorable.

 

Shares of HDFC AMC rallied more than 70 percent so far in 2019, emerging as one of the top wealth creators of the year. However, analysts believe putting fresh money in the scrip might not be advisable at current levels.
Even though the the momentum is strong in the stock, analysts opined that investing in the company at current levels might not be the way to go since the risk-to-reward appears to be unfavorable. As for the investors who are already invested, they should continue holding the stock but should have a strict stoploss, they added.
After a strong rally, global investment bank, Morgan Stanley downgraded HDFC AMC to equal weight from overweight, but increased its target to Rs 2,650 from Rs 2,300 earlier.
“The downgrade is largely due to the recent run-up in prices. The company has a strong market positioning over the past year,” said the note.

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It has also improved its relative positioning within financial space being a free cash flow, balance sheet light business, the note added. Strong results also added to the optimism.
HDFC Asset Management Company said its profit in the quarter ended June 2019 grew 42.2 percent to Rs 292 crore with asset under management growth of 18 percent YoY. Its profit in the corresponding quarter of last fiscal stood at Rs 205.3 crore.
In terms of technicals, a steep rise was seen in the stock in the last couple of weeks from the level of Rs 2,138, suggesting that the momentum is still high, with RSI(14) at 75.80 and ROC at 19.13 on the daily chart.
“Those who are holding the stock should enjoy the ride and keep trailing stop losses but I would not advice new traders to enter at these levels,” Romesh Tiwari, Head of Research, CapitalAim told Moneycontrol.
“With this momentum, the stock may touch Rs 2,950 in the short term with support levels around Rs 2,300-2,370,” he said.