ICICIdirect.com report on Shriram Transport Finance Corporation
NBFCs led by HDFC Ltd remained subdued in the current market move and did not participate much despite significant volatility in the broader index. As the Nifty made its new lifetime high, stocks from the financial space are still 30-40 percent down from their year highs. Recently, we observed fresh inflows in the midcap segment where Infra and capital goods stocks have seen good buying interest. As an ancillary to these sectors, we expect financial stocks to perform in the coming weeks while the Nifty may remain in consolidation mode
After making lows in January 2012, Shriram Transport Finance (STF) has almost doubled from Rs 425 to Rs 835 in May 2013. Since then, profit booking was seen to the tune of almost 40 percent in the stock where it found support at the 76 percent retracement of the entire up move near Rs 500 levels. Since August, 2013 STF has been consolidating in the range of Rs 550-600 levels. It has made a couple of unsuccessful attempts to breach the prevailing range so far. However, looking at the delivery in the current attempt, it seems it may witness some good upsides in the days to come
From an F&O prospective, STF has been witnessing continuous decline in open interest indicating exit of short positions. The current open interest in the stock has declined more than 40 percent compared to the open interest seen during November. We believe the current trend of short covering may continue in the stock, which will eventually prompt it to move towards Rs 695
In the first week of December, STF witnessed delivery based buying in the range of Rs 590-600. Since then, it remained above these levels despite the Nifty taking a plunge of more than 4 percent. With delivery based buying support, we expect STF to outperform in the days to come. Eventually, it may surpass its previous highs of Rs 650 levels on the back of short covering
The important moving averages of 50 DMA and 100 DMA are placed in the vicinity of Rs 580, which is expected to act as strong support in the coming weeks. Hence, any decline in the stock can be utilised to accumulate long positions for a target of Rs 695
Recommendation:Buy Shriram Transport Finance in cash in the range of Rs 602-612Target: Rs 695Stop loss: Rs 552 on closing basisTime Frame: Three months
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