Shares of Mahindra Holidays & Resorts India Ltd (MHRL), which hit a fresh 52-week high of Rs 286.75 on July 5, are on track to surpass Rs 300 levels in the next 6-12 months, suggest experts.
The stock has rallied about 31 percent so far in 2021 versus Nifty's 13 percent and BSE500 index's 18 percent run. The stock has also beaten the benchmark on a 12-month basis, rising about 57 percent compared to 49 percent gains seen in the Nifty50, and 56 percent growth seen in the BSE500 index.
The outperformance comes after the stock was in a multi-year correction phase since 2017. The recent wave of interest comes amid the lifting of lockdowns which will benefit the tourism sector which has been reeling under pressure since the last few months.
The unlocking theme coupled with the technical charts of the counter suggest a sustained run, which could potentially take the stock to Rs 350 levels. This equates to about 23 percent upside from the July 5 closing price of Rs 283.45.
Mahindra Holidays & Resorts India is a part of the leisure and hospitality sector of the Mahindra Group. It offers quality family holidays primarily through vacation ownership memberships.
Incorporated in 1996, the company's flagship brand ‘Club Mahindra’ has over 250,000 members, who can holiday at 100+ resorts in India and abroad, said the company website.
“Since 2020, we have witnessed that prices discount everything. It is an apt statement when it comes to technical analysis. Markets behaved wildly when the pandemic began but soon reversed when the pandemic was spreading at its highest pace,” Mehul Kothari, AVP–Technical Research, AnandRathi said.
“Considering the weekly chart of MHRIL -- we are witnessing a pattern which resembles an inverse head and shoulder pattern that is bullish in nature,” he said.
An inverse head and shoulder pattern is similar to the standard head and shoulders pattern, but inverted: with the head and shoulders top used to predict reversals in downtrends.
What makes the H&S in MHRIL more noteworthy is that the right shoulder has seen a faster run, which sometimes indicates that bulls are in hurry to buy the stock.
“Now, the theoretical target for the pattern comes around Rs 370. Another thing which we are noticing is the placement of ADX (14) on the weekly scale,” added Kothari.
The average directional index (ADX) is used to determine when the price is trending strongly. In many cases, it is the ultimate trend indicator. It comprises of ADX line and DMIs (Directional movement indicator).
When the +DMI is above the -DMI, prices are moving up, and ADX measures the strength of the uptrend. When the -DMI is above the +DMI, prices are moving down, and ADX measures the strength of the downtrend.
“In the case of MHRIL, the trend is positive and the ADX line is rising above 25 level. Generally, the trend turns stronger when the ADX line moves above 25 (irrespective of the direction),” explains Kothari.
"Even on the daily scale, ADX (14) is positively poised. Hence, as per the discussed technical evidences, we are of the opinion that at this zone stock is a decent candidate to go long."
Kothari recommends investors accumulate MHRIL between Rs 260 - 250 for an upside target of Rs 350 with a stop loss of Rs 200. The time frame for the same could be between 6- 12 months.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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