BAJAJ FINSERV: THE STOCK WITH A FUTURE (BEST ENTRY PRICE)

In this Post we shall examine BAJAJ FINSERV in an attempt to find the optimum entry price. As we all are aware that this Stock has been on a bit of a roll in the past couple of months particularly after it posted exciting Q1 2011-12 numbers as also the buzz created by speculated Banking foray etc. At CMP 553 (52 wk high 622 52 wk low 394 on the NSE) it is trading at 5.75 times Book.

Looking briefly at the FUNDAMENTALS first, we find that the Company's Insurance Business has done well in both General as well as Life categories and the retail focus has obviously been profitable largely. The Consumer and SME businesses have also been growing at a fast clip even though the hard Interest rate regime is likely to hurt in the short to medium term. But the biggest kicker for the Stock is likely to come from the possible banking foray as well as the robust growth of the retail Insurance business. So fundamentally things look good.

Now examining the TECHNICALS, we look at the 2 year Price Chart to find that the 200 DMA is a fairly reasonable support even though in the recent past it has been decisively violated in the Jan-March 2011 period. The 200 DMA is at 492. However looking at the 1 year DMA on the 2 year Price Chart we find a more solid support at 1 year DMA levels which has  not been violated  at all during the 2 year period!!! This said 1 year DMA is at 471.

Taking a holistic view, in my opinion 490 should be an excellent first entry price in the Scrip and the long term support at 471 should hold under most circumstances. So one could safely buy in the 495-470 zone with a long term view. The more enterprising investor could even make first entry at 505 levels which the scrip might reach on any downturn in the near future.

Therefore 470-495 seems to be a safe buying zone for the Scrip for a long term value investor.