Equipment maker Cummins India has outperformed benchmark indices for a year, and technical analysts say the stock is on a bullish trajectory that signals a major upside in the near term.
It has already rallied over 75 percent so far in 2021, well above the gain of nearly 18 percent gain in the Nifty50 and about 20 percent in the S&P BSE 200 index.
On a one-year basis, it has rallied 116 percent compared to the 45 percent rise seen in the Nifty50, and 47 percent gain seen in the S&P BSE 200 index in the same period.
Cummins India, with a market capitalisation of nearly Rs 28,000 crore, has been in a steady uptrend. It hit a fresh 52-week high of Rs 1,033 on August 18 on the BSE. The price action gained momentum after the company reported that its consolidated net profit soared by 365.7 percent to Rs 247 crore in the first quarter.
The stock is trading above its multi-year highs, and experts say the momentum can take it towards 1,300, or an upside of 26 percent from the August 18 closing of Rs 1,028 on the BSE.
In the past 17 months, the stock has given more than 3.5x returns after the low in April 2020.
After a high in July 2017 around 950 levels, the stock prices crept lower for the next three years to make a panic low at 270 in April 2020. However the prices have climbed back to recover all the lost ground in half the time it took to fall.
“This up move has a great significance as it is seen with a huge increase in volumes and for outperforming benchmark and midcap index by a fair margin in the current Bull Run,” Rajesh Bhosale, Technical Analyst, Angel Broking, said.
The price has now closed above multi-year high and the momentum, experts say, signals major upside in the near term.
“Technically as well with the V-shaped recovery prices have confirmed a classical ‘ADAM’ pattern bullish breakout that belongs to the family of saucer formation,” he said.
In technical analysis, Rounding Bottom or Saucer formation is the key price formations analysts see as a bullish pattern.
This pattern can be further categorized into "Adam" when the bottoming out is seen with a V-shaped recovery whereas the "Eve" pattern when the bottoming out takes some time and is in U-shaped formation.
“To add up, we are also seeing a ‘FLAG’ pattern breakout well known for its high conviction and momentum moves. We recommend a buy in the counter at current levels and on dips towards Rs 945 for a target of Rs 1,300. The stop loss is to be placed at Rs 810,” recommends Bhosale.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.