Metal stocks have gone through some profit taking after the recent rally but the technical pattern suggests that momentum could favour Hindalco, and Jindal Stainless that have already rallied 90 per cent, and 140 per cent respectively so far in 2021.

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Stocks in the metal sector, where most quality stocks have undergone healthy price/time correction and are available at the favourable risk-reward proposition, as the larger structural uptrend remains intact, ICICIdirect said in a report.

The Nifty Metal index has approached its key support threshold around 5200 mark which is a) value of long-term rising 200-Day moving average b) 80% retracement of June-October 2021 rally.

Readings on weekly stochastics are extremely oversold last seen in October 2020 indicating that sentiment is now in favour of accumulating quality companies with favourable risk-reward setup.

China has recently cut its reserve requirement ratio by 50 bps to boost its economic growth. This cut in reserve requirement ratio for major commercial banks will be effective from 15th December 2021.

The domestic brokerage firm picks stocks with a blend of favourable risk-reward proposition and higher relative strength in this edition.

Hindalco: Buy| Target Rs 508| Upside 11%| LTP Rs 455

Hindalco has rallied over 90 per cent compared to over 24 per cent rally seen in 2021. The stock after six quarter of strong up move has witnessed shallow retracement in the last two months on the weekly chart.

The entire price action is well channelled as can be seen in the chart signalling inherent strength, said the ICICIdirect note.

The stock is currently seen rebounding taking support near the lower band of the rising channel and 200 days EMA (currently placed at 403) thus offering a fresh entry opportunity with a favourable risk-to-reward ratio set up.

ICICIdirect expects the stock to resume up move and head towards our target of Rs 508 levels as it is the 80% retracement of the entire decline (551-407) that translates into an upside of over 11 per cent from Rs 455 recorded on 10 December.

Jindal Stainless: Buy| Target Rs 202| LTP 173| Upside 16%

Jindal Stainless rallied by over 140 per cent so far in 2021 compared to 24 per cent upside seen in the Nifty50 in the same period.

The share price of Jindal Stainless has remained resilient within the metal stocks. It has entirely retraced the past 27 months decline (132-21) in just 16 months and is seen sustaining above the same, highlighting structural turnaround.

The stock has managed to hold above upward sloping support trend line joining lows since June 2020, highlighting elevated buying demand that signifies inherent strength, said the ICICIdirect note.

The domestic brokerage firm expects, the stock to endure its relative outperformance and gradually head towards its all-time high of 202 in the coming months that translates into an upside of 16 per cent from Rs 173 recorded on 10 December.

(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.)