Steel Authority of India (SAIL), one of the largest steelmaking companies in the country, has rallied more than threefold in the past year compared with a 41 percent rally in the Nifty 50 and a 47 percent rise in the BSE 200 index.
On a year-to-date basis as well, the stock has been an outperformer, advancing more than 65 percent, compared with an almost 12 percent rise in the Nifty 50 so far in 2021.
With a market capitalisation of more than Rs 50,700 crore, SAIL has been on buyers’ lists over the past year, in line with the rally in metals amid a bull market in global commodities. The state-owned company has also been reducing debt, which is a positive sign.
There was some profit booking after the stock hit a 52-week high of Rs 151.10 on the BSE on May 10, 2021, but experts said the technical structure suggests the stock is likely to continue upwards and could retest Rs 151.10 in the next three to four months.
A close above the critical resistance level of Rs 140 could pave the way for the stock to retest the 52-week high mark and take it beyond that level for an upside of 23-43 percent from the closing price of Rs 122.80 on the BSE on July 20.
SAIL, which is one of the Maharatnas among the country’s central public sector enterprises, produces iron and steel at five integrated plants and three special steel plants.
On the weekly chart, prices are rising in a higher top and higher bottom formation, in a perfect upward sloping channel.
As per the Elliot Wave Theory, prices have been rising in impulse waves since March 2020. Currently, prices are in wave 4 of the larger degree wave 3 and will head for wave 5 of the larger degree wave 3.
The Elliot Wave is a theory of market behaviour published by Ralph Nelson Elliott in the 1930s. According to the theory, the stock market follows a pattern of five waves up and three waves down to form a complete cycle.
On the daily chart, prices are consolidating in the fourth wave in symmetrical triangle formations marked a-b-c-d-e.
“Consolidation is forming in such a way that it is taking multiple support on the lower band of the upward sloping channel. We will get confirmation above 140 levels, which will also confirm the completion of the fourth wave,” said Jignesh Pandya, senior research analyst at Monarch Networth Capital Ltd. in Mumbai.
“Momentum oscillator RSI (relative strength index) is constantly sustaining above 40 level and volumes have also narrowed down, waiting for a strong spark. Going forward, price sustainability above the immediate resistance level of 140 will trigger the momentum towards the next immediate resistance at 151 level,” he said.
Pandya recommends buying SAIL at the current level or on confirmation above Rs 140, with a target of Rs 151-180 and Rs 110 as the final stop-loss.
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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