Is Reliance Nippon Life AMC Stock a Good Long-Term Investment in 2020?

Investing in the right stocks can lead to significant returns over the long term. In this article, we will analyze Reliance Nippon Life Asset Management Limited (Nippon Asset Management) both technically and fundamentally to determine if it's a suitable stock for long-term investment in 2020.

Technical Analysis

When it comes to technical analysis, my primary focus is support levels and the Relative Strength Index (RSI). Although I don't rely on numerous indicators, these two can give us a clear picture of the stock's strength and potential. Here is my technical analysis of Nippon Asset Management:

Daily Chart: The stock is currently getting support at the 20 MA level, indicating a short-term support. This level is crucial for short-term traders as it can help in determining potential entry and exit points.

Monthly Chart: Looking at the long-term perspective, the stock is also getting support at the 20 MA level. This suggests a strong resistance level that the stock is unlikely to break through anytime soon.

Fundamental Analysis

Turning to fundamental analysis, several factors make Nippon Asset Management a promising stock for long-term investment. Here are some key points:

Control: The stock is held by 76 promoters, which is an excellent point as it indicates strong management control and likely alignment of interests between management and shareholders.

Profit Growth: The company has been consistently showing growth in profits, which is a positive sign from an investment perspective.

Price Point: While the stock is currently expensive, it can offer a good return via Systematic Investment Plan (SIP). One can consider accumulating the stock at a lower price, which might be possible if the stock dips further.

Conclusion and Personal Insight

Based on the above analysis, I recommend considering Nippon Asset Management as a long-term investment, ideally through a SIP, over a period of about 3 years. With a strategic approach and patient investment, one could potentially achieve an 80% return.

For myself, I purchased this stock at 248 Rs. per share when it was supporting the 20 MA level, and I bought a few more shares around 265 Rs. Since then, the stock has traded around 295 levels, making it a good trade if you missed the earlier opportunities.

Additional Insights

The stock is fundamentally strong, especially considering the potential for growth in the asset management industry in India. The mutual fund sector in India has a low penetration compared to other countries, and this presents a significant growth opportunity.

Nippon Asset Management currently pays a dividend of about 2% and trades at a P/E ratio of 20 times, one year forward. This reflects the company's free cash flow-generating ability, making it a robust investment.

One potential drawback is that while other AMCs are growing at a rapid pace, Nippon Asset Management has been slower compared to its peers.

From a technical standpoint, the buying pattern on dips remains strong, suggesting that the stock might continue to find support at around the 290 bracket. However, it remains strong above this level. I held this stock for about one year and sold it around 285 levels, achieving a 60% profit. Currently, I have no position in the stock.

Final advice: While it's a good bet, always consult a financial advisor before making any investment decisions. Additionally, given the growing mutual fund and SIP culture, the future could be promising for AMC stocks.

Example Portfolio

For a balanced approach, one might also consider investing in NIPPO INDIA CDSL, which is another strong player in the financial services sector, especially with the evolving mutual fund and SIP culture.

In summary, Nippon Asset Management is a strong stock with immense growth potential in the long term. With proper analysis and strategy, it can be a valuable addition to any long-term investment portfolio.