November 7, 2017

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Preface

Markets are trading near an all-time high today. The Nifty is placed above 10,000 while the
Sensex is trading above 33,000. On a year to date basis markets are up by 27%. This has
come as a welcome relief after two years of flat performance.

Bulls have tightened their grip over the last month. We havent witnessed a pullback of
more than 1.25% during the month.

As markets keep inching higher day by day, peoples expectations from the markets have
also kept on increasing. The price to earnings ratio of the index is currently placed at
26.74its highest ever since 2008. It simply means that peoples expectations from the
markets have moved up much faster than earnings.

Peoples expectation from individual stocks have also risen. A year ago, a common investor
would be happy with a 30% return from a stock in a year. Today 30% returns in a month
doesnt seem enough.

The ever-increasing expectations and greed makes the common investor vulnerable to
picking any stock which is moving up. There are chances that he may eventually end up
with shady companies or stocks driven by operators.

And when such stocks start falling there is hardly any exit option left. If you are new to
trading then its more important than ever to trade only in carefully selected fundamentally
strong stocks.

The benefits of trading in such stocks is that you can limit the scope of negative surprises
drastically. One cannot eliminate the uncertainties but one can sleep soundly knowing that
you have done the right thing by putting your money in fundamentally sound stocks.

Apart from this one can also prevent money from getting blocked for months when the
stocks are going nowhere. By trading fundamentally strong stocks one can enter when the
stock is set for an upside and exit once the rally is over.

Keeping this in mind, I bring two stock recommendations for you today which passes both
the fundamental and technical filters.

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Stock Pick #1:
PI Industries

PI Industries Limited, established in 1947, is amongst India's leading agro-chemical

companies. It operates under two focus segments - agrochemicals and custom synthesis.

The agro-chemical division offers plant protection products, specialty plant nutrient
products and solutions. With a distribution network of over 40,000 retailers, PI has a strong
rural reach across the country.

The customs synthesis division offers contract research and production of agrochemicals,
intermediates and other niche fine chemicals for global innovators. This line of business
especially is backed with a strong R&D support. It works to develop and commercialize
products based on newly discovered chemistries with reputed MNC innovators.

The company has always been on Equitymaster research teams radar ever since it was
first recommended by Hidden Treasure team in January 2013. More recently the Value Pro
team which looks at stocks that Buffett would buy has recommended it to their subscribers
in June 2017.

A couple of key positives which the Value Pro team has listed for the company is its robust
business model, a debt free status with high return on equity.

The company has passed the fundamental filters of not just the Value Pro team but also
of The India Letter team which looks after Megatrend stocks with key tailwinds for the
economy.

The company passes on the qualitative filters as well as the technical filters. Heres how it
looks on the charts

Techno Funda Opportunities Knocking | 2

PI Industries traded in a falling channel after topping out at a level of 963 in February 2017.
It slipped lower throughout the year 2017 and eventually hit a low of 675 in August 2017.

Since then the stock has been trending higher in a rising channel over the last three months.
This indicates a shift in the short to medium term trend of the stock.

On 30th October, the stock was up on large volumes on the back of a large block deal.
Rising volumes and rising price further confirms the uptrend.

Thus, all of the above indicates that the uptrend which began in August is likely to sustain
going forward. Therefore, I recommend considering buying the stock up to an upper limit
price of 820 with a target of 10% and a stoploss of -5%.

3 | Techno Funda Opportunities Knocking

Stock Pick #2:
Cyient Ltd.

Cyient Ltd. is involved in providing IT services in two broad categories: engineering services
and data & network operation services.

In the engineering division, the company designs services for manufacturing firms in
aerospace, defense, energy, railways, mining, and semi-conductor industries among others.
It also develops software for power plants, chemical plants, and upstream oil & gas firms.

The data & network division develops software for utilities and telecom firms to help them
manage their vast networks.

The company has approximately 12,800 employees across 21 countries. It has a well
spread out revenue profile. A bulk of its revenue comes from the US while the aerospace
and defense vertical contributes about 38% of the total revenue.

The company has been under Equitymaster teams radar for quite some time. It was first
recommended by The India Letter team in November 2014 and later by Hidden Treasure
team in April 2016. More recently the Value Pro team has also recommended the stock
after it met all the criteria Buffett would watch out for.

So the company passes all the qualitative filters that we look for. Now before we look in
to the technical filters I want to talk about the IT sector for a moment. I am sure you have
looked at this chart before. But it is so important that I want to show it to you once again.
This is the chart of the Nifty IT index which tracks major IT companies in India.

Techno Funda Opportunities Knocking | 4

 Greed and Fear Cycle in IT Index

The IT sector goes through greed and fear cycle every two years. The index is currently in
the greed phase which means the IT index could rise till February 2019.

Most of the time it happens that market participants focus all their attention on IT bellwethers
like TCS, Infosys and Wipro. And ignore the rest of the IT space.

Now there are nearly 70 actively traded IT stocks on the exchanges which needs attention
and Cyient is one of them.

The IT sector goes through greed and fear cycle every two years. The index is currently in
the greed phase which means the IT index could rise till February 2019.

Most of the time it happens that market participants focus all their attention on IT bellwethers
like TCS, Infosys and Wipro. And ignore the rest of the IT space.

Now there are nearly 70 actively traded IT stocks on the exchanges which needs attention
and Cyient is one of them.

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Cyient Ltd. started trending higher along with the IT index after bottoming out in February
2013. It rallied almost four times between February 2013 and February 2015.

Just like the IT index, it went into a consolidation for the next two years. The stock has
mostly traded sideways in a range of 450 to 550 (except for a brief fall to 370 in February
2016.)

The stock is currently finding good support from the rising trendline I have drawn from the
February 2016 lows.

Recently, it has also witnessed heavy volumes on the back of a few block deals. This
suggests that buying interest is picking up once again after almost two years of slackness.

The weekly charts indicate that the stock could breakout out of the 550 resistance anytime
soon and start moving higher like the IT index.

Thus, I recommend to consider buying the stock at or below 530 with a target of 20% and
a stoploss of -10%.

Techno Funda Opportunities Knocking | 6

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 DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS)
REGULATIONS, 2014

INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was
incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services
Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI
(Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views,
opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
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For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
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DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:

aa 'Subject Company' is a Company on which buy/sell/hold view or target price is given/changed in this
research report

bb Except Cyient Limited, Equitymaster does not have financial interest in any other subject company.

cc Equitymaster's investment in Cyient Limited, is as per the guidelines prescribed by the Board of Directors
of the Company. The investment in Cyient Limited however, is made solely for building track record of its
services.

11 | Techno Funda Opportunities Knocking

dd Equitymaster's Associates, Research Analyst or his/her relative have no financial interest in the subject
company.

ee Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial
ownership of one percent or more securities of the subject company at the end of the month
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aa Neither Equitymaster nor it's Associates have received any compensation from the subject company in
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Definitions of Terms Used:

aa Buy recommendation: This means that the subscriber could consider buying the concerned

Techno Funda Opportunities Knocking | 12

aa stock at current market price keeping in mind the tenure and objective of the recommendation service.

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