Technical Check: This large-cap low beta is a good buy on dips stock as long as it holds 200-DMA; upside potential 18-40%

Indian Oil Corporation Ltd (IOC) rose 24 per cent in the last year compared to over 19 per cent upside seen in the Nifty50, and over 41 per cent rally seen in the Nifty Energy index.

IOC underperformed the sectoral index by a wide margin in the last one year, but experts are of the view that the trend is picking up, especially after it closed above the 200-DMA placed at Rs 113.

The company with a market capitalisation of Rs 1.1 lakh cr hit a 52-week high of Rs 141.75 on 9th November and then the trend went sideways pushing the stock below crucial moving averages.

IOC found support near 108.25 on the BSE on 22 December and bounced back. The stock rallied nearly 10 per cent in the last month taking it above the 200-DMA, which is a positive sign for the bulls.

As long as the stock stays above the 200-DMA the momentum could take the stock higher towards its 52-week high of Rs 141.75 translates into an upside of about 18 per cent from Rs 120 recorded on 24 January, suggest experts.

A breakout above Rs 141 could take it higher towards 151 and 172 translates into an upside of 25-43 per cent in the near term.

It is a low beta stock of 0.8 makes it less volatile when compared to the market movement. This is evident from the fact that the stock fell a little over a per cent on 24 January when both the Sensex and the Nifty50 suffered losses of over 2.6 per cent each.

The stock belongs to the Energy/Oil & Gas sector, which has recently come back in flavor as Crude Oil, climbed to the highest levels since 2014. The underlying is slowly coming out of a corrective phase and building in on multi-year highs.

The Nifty Energy index has climbed to an all-time high last week. Experts remain bullish on the sector and envisage having good upside potential.

The longer-term chart of IOC corrected from 232 in September 2017 to 71 in September 2020. The calendar year 2020 saw prices forming a double bottom, around the 70-75 mark.

“Once during the panic bottom of March 2020 and second during the bottom of September 2020. Post the correction we saw a gradual and rational uptrend, spanning over 15 months, where the stock created yearly highs around 140,” Pushkaraj Sham Kanitkar, VP (Equities) at GEPL Capital, said.

The short-term chart of IOC shows the second level correction on the daily chart from 140 in Oct 2021 to 105 in Dec 2021. This correction shows prices finding support around the 200 DMA then.

The uptick from there saw prices move back above the 125 mark. “In the process, we have seen the 20 DMA converging close to the 200 DMA and then ticking back. This in a way indicates that the uptrend is intact in the bigger picture,” says Kanitkar.

Kanitkar further added that a daily close above 130 levels will further confirm the breakout from the retracement with possible continuation to 52 HIGHs (142), with further extrapolation to 151 and 172 (50 per cent and 61.8 per cent Fibonacci retracement of earlier correction from 232 to 71).

“An initial stop loss should be placed somewhere below 107; which is the swing low; which can be trailed as the prices move up,” he added.

(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.)