Public Infrastructure Finance company REC Limited has underperformed Nifty50 on both 12-month and year-to-date basis. However, technical charts suggest the tide seem to be turning in the favour of the bulls, which could take the stock over 20 percent higher from current levels.
REC rose a little over 10 percent in 2021 compared to the 13 percent upside seen in Nifty50. The stock rose 41 percent in the last year compared to the 46 percent rally seen in Nifty50.
The stock hit a 52-week high of Rs 167.75 on 9 June 2021 and since then, has been consolidating in a narrow range. But, the recent price action suggests that the stock could challenge its 52-week highs in the next 2-3 months.
Long-term investors can stay put as the momentum could take the stock towards Rs 170-180 levels in the next 2-3 months. This translates into an upside of over 20 percent from the July 12 closing price of Rs 147.15. Stop loss can be placed below Rs 137 for all long positions, suggest experts.
REC is a Navratna company under the Ministry of Power. It is a leader in providing financial assistance to the power sector in all segments, be it Generation, Transmission or Distribution.
On the technical charts, the stock is trading well above its short and long term moving averages such as 5,10,20,50,100 and 200-Days Moving Average which is a positive sign for the bulls.
The stock had produced one of the best one-way rallies last year from mid-October 2020 to mid-November 2020 as it rallied from Rs 92 level to peak out near Rs 143 gaining almost 55 percent and thereafter it has witnessed a rangebound movement maintaining a strong base near 124 level.
Recently in April 2021, another good rally from 124 to 167 level gained a decent 35 percent return to give another good opportunity for the market players.
“The stock has witnessed a short correction from the peak level thereafter to bottom out near 140 level where right now it is consolidating and gathering strength with stability and has maintained above the significant 200DMA level,” Vaishali Parekh, Assistant Vice President - Technical Research at Prabhudas Lilladher Pvt. Ltd said.
“It has also maintained near the significant 50-Days EMA level of 144 and currently a decisive move above that level has remarkably improved the bias and strengthened the trend to anticipate for a decent rise from here on giving another opportunity for the investors,” she added.
Parekh further added that the RSI is well placed and has indicated a trend reversal to signal a buy and thus justify our view for a buy recommendation.
RSI or the Relative Strength Index is a momentum indicator used to identify overbought or oversold conditionsa in the stock. RSI reading below 25 is interpreted as oversold. RSI between 25 & 45 is interpreted as a bearish condition.
RSI between 45 & 55 is interpreted as a neutral condition. RSI between 55 & 75 is interpreted as a bullish condition. RSI reading greater than 75 is interpreted as an overbought.
“Technically, the daily chart looks very attractive and one can buy and accumulate this stock for an investment purpose for a time frame of 2-3 months expecting an upside target of 170-180 levels keeping the stop loss near 137,” recommends Parekh.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.