HCL Technologies, an Indian multinational information technology services company, has rallied 22 percent so far in 2021 compared with an almost 18 percent gain in the Nifty 50 and a 40 percent jump in the S&P BSE IT Index.
Although the stock has underperformed its sectoral index, on the technical charts, the recent price gains suggest that its breakout from a long-term consolidation phase on August 5 signals a further upside.
With a market-capitalisation of over Rs 3.15 lakh crore, HCL Technologies hit a 52-week high of Rs 1,178.05 on the BSE on August 23. The momentum could take the stock towards Rs 1,270-1,360, which translates into an upside of 13-22 percent from the August 20 closing price of Rs 1,117.15.
The company’s share price jumped on August 23 after the research firm CLSA retained a “buy” call on the stock and raised the target to Rs 1,320 from Rs 1,180. CLSA increased its FY23/FY24 EPS estimates by 1-2 percent.
The IT company said on August 17 it signed a five-year deal with Wacker Chemie AG, a German multinational chemical company, to establish a modernised digital workplace and improve its quality-of-service delivery.
“Prices went through descent price and time-wise correction since January 12, 2021, and recently it has broken out from the long-term consolidation formation on August 5,” said Jignesh Pandya, senior research analyst at Monarch Networth Capital.
Consolidation marked with A-B-C completed its price and time-wise correction exactly above the lower band of the rising channel line and since then it has shown signs of strength and rising in a higher top and higher bottom formation.
“Momentum oscillator relative strength index (RSI) is continuously sustaining above 70 level, indicating a positive build-up in momentum, which will transform into a positive price action for the stock,” he said.
Pandya recommends that investors buy the HCL stock at the current market price or on dips at Rs 1,100-1,080, keeping a stop-loss at Rs 970 and a target of Rs 1,270-1,360 in the next 3-4 months.
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