Technical Check: 50% returns in a year! Tech Mahindra survives sell-off on D-St due to Russia-Ukraine war; should you buy?

Tech Mahindra Ltd rallied over 50 per cent in the last year compared to 5 per cent upside seen in the Nifty50 in the same period. The IT major outperformed benchmark indices on a 1-week, and 1-month basis amid volatility from the Russia-Ukraine war.

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The IT stock rose over 4 per cent in a week and remained flat on a monthly basis compared to 6 per cent, and 8 per cent fall seen in the Nifty50 in the same period.

The stock with a market capitalisation of nearly Rs 1.4 lakh cr hit a 52-week high of Rs 1837 on 30 December but then the trend turned sideways. However, the stock remains resilient despite the volatility caused by the Russia-Ukraine war.

The stock recently tested its 52-week low placed at Rs 1394 on Feb 24 but managed to hold above the crucial long-term moving average which resulted in a bounce back despite steep decline seen in benchmark indices.

The momentum should continue as long as the stock holds above the long-term average, and the first target can be placed at Rs 1560 that translates into an upside of over 7 per cent from Rs 1,453 recorded on 4 March, suggest experts.

The long-term weekly chart of Tech Mahindra shows a structural similarity (of varying degree) over past 5 years.

The initial leg saw prices move from 356 in June 2017 to 838 in March 2019, thereby returning around 2.5x in the 9-month period.  

Within this move we saw the prices valeting in a parallel channel for FY 2018-19 and FY 2019-20. The pandemic lows saw prices correcting to 471 (a higher low as compared to those created in 2017).

Post this corrective move, we saw a rational uptrend till December 2021 when prices created an all-time highs at 1838. There has been a welcome correction post wherein prices have respected the 38.2% Fibonacci retracements at 1315.

“The short-term chart of Tech Mahindra shows testing of the 200 DMA @ 1391. Post this test of levels last week, we have seen a bullish weekly candle with close equivalent to the high of the week,” said Pushkaraj Sham Kanitkar - VP (Equities) at GEPL Capital.

“The second level of breakout on the daily chart will once get confirmed when prices break above the level of 1515, the earlier 23.6% retracement. The breakout will also bring it in close contention of the confluence 10 Week MA (50Day) and 20 Week MA (100Day) currently around 1565,” he said.

“A daily close above 1515 will kickstart a further burst of momentum, but current pricing augurs well from the risk-reward perspective. One can eye upsides to the confluence of moving averages around 1560 as an immediate target, the all-time HIGHs will stand as a secondary target,” added Kanitkar. Traders can place an initial stop loss somewhere below 1295, a bit below the recent swing low.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)