Technical Check: Multibagger of 2021! Rally not over in this Vijay Kedia-owned smallcap manufacturing company

Elecon Engineering Ltd has risen more than 300 per cent so far in 2021 compared to 27 per cent rise seen in the Nifty50 in the same period. However, based on technical indicators and the momentum in the stock, the rally may not be over yet.

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Elecon Engineering with a market capitalization of more than Rs 2000 cr hit a fresh 52-week high of Rs 189.70 on 18 November. Most indicators suggest further upside that could take the stock towards 275-300 levels in the next 6-9 months, suggest experts.

A target of Rs 275-300 implies an upside of over 50 per cent from Rs 182 recorded on 18 November on the BSE.

Ace investors Vijay Kedia has 1.16 per cent stake in the company, as per the September quarter shareholding pattern. He holds about 13,00,000 shares.

In terms of institutional activity, FIIs have increased their holding sequentially from 0.79 per cent to 1.58 per cent in September quarter while mutual funds decreased their holding marginally to 2.2 per cent in September quarter from 2.3 per cent in the June quarter.

Elecon Engineering Company Ltd is a pioneer in the manufacturing of Industrial Geared motors and Reducers, Material Handling Equipment, Mining equipment, casting processes etc. Elecon is one of the largest manufacturers of Material Handling Equipments and Industrial Gears in Asia.

Technically, the stock has been trading above all its short- and long-term moving averages such as 30,50,100 and 200-DMA. Although, the stock looks slightly overbought and some consolidation could be on the cards but that should be used to buy the stock.

“The price of Elecon Engineering moved from 84 in May 2021 to 186 in Sept 2021. Then a technical correction, in the form of profit booking, followed and the stock made a low of 142 in Oct 21. Value buying followed and the stock started trading above the averages,” Bharat Gala, President - Technical Research, Ventura Securities Ltd, said.
 
Recently, the stock has been demonstrating range breakouts & has touched high of 189.70, accompanied by supportive volumes.

“The Know Sure Thing (KST) indicator, Aroon Up/Down, and ADX indicator suggest a possible up move while the 200-DMA is continuously in a rising mode. The possible targets are 275-300,” said Gala.

He further added that if the stock price corrects downwards, the buy levels are (178-171)-166-(161-157). The Stop Loss to be observed in the trade is 140.

(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.)