ICICIdirect.com is bullish on Jaiprakash Associates and has recommended buy rating on the stock with a target of Rs 118 in its January 2, 2013 research report.
Rationale:
- Stocks from the infrastructure space are attracting renewed buying prior to the Budget announcement. Being one of the best performers of 2012 and direct beneficiaries, cement stocks have also started seeing good short covering of late after remaining sideways for the last two or three months
- In the recent up move from 86 to 106, the stock has moved up on the back of short covering. Fresh shorts were again added to the tune of 25% positions in the profit booking round seen from 106 to 95 levels. We expect these short positions to be stuck in the stock. The immediate thrust for upside will be provided by closure of these short positions
- The highest Call base for the stock was placed at 100 levels. As JP Associates has surpassed these levels, closure of positions is evident in the strike. These positions have been rolled into the next OTM Call strike. We expect the same trend to continue as weak hands in the stock are stuck and will continue to drive it to higher levels due to short covering
- Since the break-out seen in the stock at 70 levels in September, JP Associates was able to find support near its 50 DMA levels. Currently, the 50 DMA for the stock is placed at 95, which is expected to act as strong support in the coming sessions
- Delivery pick-up in cash was also observed in the stock from lower levels. It has increased step wise since the lows of 92. Cash accumulation at these levels is expected to provide significant cushion on declines.
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