Buy Shriram Transport; target of Rs 745: ICICIdirect

ICICIdirect.com's report on Shriram Transport Finance Corporation

"Shriram Transport Finance Corporation, driven by strong FII inflows, the Nifty has moved up sharply to 6550. The current move is mainly supported by banking, oil & gas and capital goods stocks. With the Nifty trading at lifetime highs, most stocks that were trading sideways or were reeling under heavy shorts positions, started to move up. Shriram Transport Finance is one such stock, which was trading sideways for the last two quarters. As the NBFC space has started to participate in the current up move, we believe this stock is also likely to move up

The open interest in the stock has broadly remained flat from the December series onwards. However, in the last leg of the downward move seen in the Nifty in the middle of February 2014, the stock corrected over 12 percent while the OI in the stock moved up 36 percent to 1857 contracts. However, as the stock moved over 15 percent in the last five trading sessions these short positions are seeing closure. This is fuelling upsides in the stocks. However, looking at the OI pattern of the stock in the last year, the stock is still low on leverage, which bodes well for upsides

The stock has been trading in the range of Rs 570-680 in the last seven months. Every time it is approaching near these stated levels, we have seen a pick-up in delivery, which resulted in the negation of the trend. However, this time around, the stock has seen a sharp pick-up in volumes much before reaching the higher band, which suggests strong hands are getting active. Hence, the stock may witness a breakout

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