Maruti Suzuki India Ltd rallied over 17 per cent in the last month compared to the marginal decline seen in the Nifty50 in the same period.

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The strong rally seen in the automaker in the run-up to the Budget 2022 helped price to break out from an Inverted Head and Shoulder pattern on the monthly charts.

An inverted Head and Shoulder pattern is formed when the price falls to a trough and then rises, in the second wave, the price fall below the previous trough and then rises. And, finally, the price falls but not as much as the second trough.

A breakout happens when the price starts rising after hitting the trough and breakout on the upside above the resistance level.

Most brokerage firms raised their target price on Maruti Suzuki post December quarter results even though the automaker reported a 47.82 per cent decline in consolidated net profit to Rs 1,041.8 crore for the December 2021 quarter, mainly due to the ongoing semiconductor shortage and increase in commodity prices.

Tracking the momentum post results, Maruti Suzuki with a market capitalization of over Rs 2.5 lakh cr hit a 52-week high of Rs 8966 on the BSE on 27 January.

Investors who are looking to invest fresh money in Maruti Suzuki can either wait for a dip or invest at current levels as the breakout could take the stock towards 10,700 in the next 6-9 months which translates into an upside of over 25 per cent from Rs 8553 recorded on 28 January, suggest experts.

 

Maruti (MSIL) is the market leader in the passenger vehicle segment in India. It has a market share of ~43% in passenger vehicle sales in India.

Maruti's retail market share has slipped from 49% in FY21 to 43% in 9MFY22 on weaker SUV presence and chip shortages.

While MSIL shares limited details on the product pipeline, the company said that its portfolio should strengthen in the coming year, and it has a strong focus on mid-priced SUVs where it has a weaker presence.

“Maruti is trading at 28xFY23 and being the market leader and being cash-generating, the risk-reward looks highly favorable. Stock price has formed a major multi-year inverted head and shoulder pattern on the monthly chart,” Ashish Chaturmohta, Director Research, Sanctum Wealth, said.

“It is a bullish reversal pattern which has been formed after a decline in prices from 2017 high of 9996. The moving average convergence and divergence line (MACD) after hovering around equilibrium level has turned up suggesting the start of a new uptrend in the stock.,” he said.

“It has given breakout from the bottoming out pattern with long body bullish candle indicating buying momentum in the stock. Thus, the stock can be bought at current levels and on dips to 8650 with a stop loss of 8200 for a target of 10700 in the coming 6-9 months,” recommends Chaturmohta.

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