The power finance twins - PFC and REC, recovered from their morning lows after concerns over the potential hit from RBI’s draft proposal on project finance provisions receded. A CLSA report noted that the impact on both company's profit and loss would be minimal, impacting possibly only capital adequacy ratios.
PFC and REC stocks recovered lost ground after falling 12 percent and 10 percent in intra-day trade to close at Rs 437.45 (-8.95 percent) and Rs 516.20 (-7.46 percent), respectively.
The non-stop rally in these stocks has made them more vulnerable to bad news, explaining their sharp reaction, traders said.
Here are the key levels to watch out for:
Sudeep Shah of SBI Securities observed that the stock reaction was larger than the news itself. He interprets today's movement as a retracement within the broader uptrend as the major trend of these stocks remained bullish, trading above their short and long-term moving averages on weekly scale. Additionally, he noted that they continue to exhibit higher tops and higher bottoms, indicating sustained upward momentum. Despite of sharp fall in the first half of the trading session, Shah adds that REC and PFC has witnessed smart rebound, taking support in the zone of Rs 482-484, which is the confluence of 13-day EMA level and 50 per cent Fibonacci retracement level of its prior upward rally. Going forward, he advises a cautious stance, considering the recent volatility and the need to monitor developments closely.
Milan Vaishnav, Founder of Gemstone Equity Research & Advisory Services, identifies the Rs 460-475 zone for REC and Rs 410-425 for PFC as strong support areas. He expects the stocks to stabilize and consolidate within a broad range, with limited downside. He advises investors to continue holding these stocks while utilizing declines to accumulate in modest quantities.
Dinesh Nagpal, a technical analyst, emphasizes recent stock movements and their implications. For PFC, he believes that maintaining levels above 430 could provide solid support for the time being. However, a failure to hold levels around Rs 410-Rs 415 might indicate a double top formation. In the case of REC, support is seen around Rs 460, with Rs 510 serving as short-term support. Nagpal advises caution, particularly if key support levels fail to hold, as it could signal harmful double top formations given the stocks' recent strong bull run.
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