Shrikant Chouhan
The Nifty Metal index is about to cross its immediate highest level, which is placed at 2,576. Based on broader activity in the metal basket, we could see the index surpassing the previous high of 2,576.
The Metal index witnessed a vertical sell-off since January 2018. Since the last 22 months, there were signs of a reversal in the prevailing downtrend was missing.
The metal index is going to follow the path of the Auto index. The auto index has swallowed 50 percent gains from the top of 2018, similarly, the metal index was at 4,200 and from there it fell to 2,100 levels, which was 50 percent erosion of entire gains.
From the recent lowest level, the auto index is up by 27 percent and the metal index is up by 18 percent. Coincidently, both these indices have also taken some time to correct up to a certain extent.
Fundamentally, also economic cycles of both the indices are interrelated. It is a big positive for the stock market as both the cycles are confirming that they are bottoming up.
Stock specific: For the week we are covering three stocks from the metal index, which are exhibiting bullish strength.
Tata Steel: Buy | Target: Rs 460 | Stop Loss Rs 370
In the month January 2018, it was quoting at 756 and from there it fell to 320 in the month of October 2019, which is approximately 57 percent erosion in terms of the market capitalisation of the company.
On a weekly basis, it reached the oversold level and on a daily basis, the stock has validated the double bottom formation.
Based on the price action, the stock could rally towards Rs 450-460 levels in the near term. It has already closed above the break out level, which was between 380 and 375.
The strategy should be to buy at current levels, and more on declines towards Rs 385, and keep a stop loss placed below Rs 370 for the same.
Vedanta Ltd. Buy | Target: Rs 180 | Stop Loss: Rs 140
Vedanta has a tendency to give a shock to investors. In the year 2018-2019, it fell from Rs 355 to Rs 125 in 20 months.
After erasing nearly 65 percent of the entire gains, it is trying to stabilize. On a weekly basis, it is diverging positively, which is an indication of a shift in the prevailing trend.
We advise investors to buy the stock between Rs 155 and Rs 150 levels for the target Rs 180 and keep a final stop loss placed below at Rs 140.
Hindalco: Buy | Target: Rs 210 | Stop Loss: Rs 182
Hindalco has been one of the more stable stocks in the metal basket. It was trading at Rs 284 when it started correcting towards Rs 177, which is around 38 percent.
On a daily basis, it has formed a higher bottom at Rs 180 that would lift the stock towards Rs 210-215 in the near-term. Buying is advisable with a final stop loss at Rs 182, and on the higher side, it has the potential to move beyond Rs 210.
(The author is a senior VP (Technical Research), Kotak Securities)
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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