ICICIdirect.com's report on Power Grid Corporation of India
Power Grid has been forming higher bottoms since it started moving up from May 2014. It has consolidated at Rs 110, Rs 120, Rs 130 and now Rs 140 for quite some time before finally moving up from these levels. The stock has been hitting Rs 140 levels since the start of this year. Hence, we believe the recent recovery from close to these levels is likely to take the stock to much higher levels in the days to come
Since the FII limit has been hit in the stock in the cash segment, we have seen a consistent build-up in the futures segment. This shows that the interest level in the stock on part of FIIs is intact. This bodes well for stock upsides
The rollover in the last few series has also remained high in the stock. The last three-month average rollover was 83%. This time, in March-April the rollover was more than 88%. It means positional traders are quite active in the stock.
The highest Call base has shifted to 160 from 150 strike, which shows upward thrust in the stock. It means Call writers have been forced to close their positions at the 150 strike and are shifting their positions to the 160 strike. However, the expected up move in the stock would again force Call writers to further shift their positions higher
The delivery pick-up has also increased near Rs 145 levels. It has happened twice on March 24 and April 6 that the delivery near the same level of Rs 145 has picked up. This means the risk-reward is also favourable for creating long positions at current levels
Quite high volumes were seen in the stock on March 26 when it formed a high near Rs 149.5 levels. Since then, the stock remained lacklustre. Now, it has taken out this high. Hence, Rs 145-149 would remain a major support area on declines
The 100 DMA for the stock is also placed near Rs 145. Since the start of this year the stock has consistently found support near this average
Recommendation: Buy Power Grid in the range of Rs 150-153, target price: Rs 184, stop loss: Rs 136
Time Frame: Three months
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