Rally in HDFC Bank is over after this week’s profit-booking? Think again!

The news of the merger between the housing finance heavyweight and India’s largest bank by market capitalisation catapulted stock markets, with the Sensex gaining over 1,000 points on Monday.

Those gains, however, were short-lived as HDFC Bank’s stock succumbed to a hefty bout of profit-booking after its surge on Monday. After skyrocketing as much as 14 per cent on Monday, the bank’s scrip ended the week 9 per cent lower.

But, for those who may have thought twice about buying the stock amid such volatility, Mehul Kothari, AVP – Technical Research, Anand Rathi Shares and Stock Brokers, has a reassuring view.

“After the recent correction; HDFC Bank is hovering near the 61.8% retracement level of the entire rally which started from 1,400 to 1,700. This support coincides with the gap area formed due to the merger news. Also the support zone is also the placement of Kijun from Ichimoku indicator. Hence there is a high probability that the stock might resume its uptrend,” Kothari said.

Kothari sees a potential upside of Rs 1,625 on HDFC Bank’s stock in two to three weeks. This represents a 7 per cent increase from the closing price of Rs 1,515 on the BSE on Friday.

The analyst’s advice for short-term traders is to buy the stock in the range of Rs 1,515 to Rs 1,505 with a stop-loss of Rs 1,450.

The merger, which will create a new financial sector behemoth in India, would create scale and synergies for both entities. Over the last couple of years, HDFC Bank has been beset by glitches in digital initiatives while its retail business faced competition from the increasing reach of fintech companies. HDFC, on the other hand, has been facing stiff competition from public sector banks in the mortgage business.


STOCK SHOPPING? SUNTECK HAS 12% UPSIDE

Another stock that holds great promise in the near-term is realty firm Sunteck, Kothari said.

The technical analyst believes that the stock is on the verge of a “massive breakout”, which may get confirmed above the Rs 500 mark for the scrip.

“At this juncture; the trend is very strong and the price action indicates that the possibility of the breakout is very high. In addition; at this juncture the reward to risk ratio looks highly lucrative to go long. Thus; one can accumulate the stock near Rs 485 with a stop loss of Rs 450 for upside target of Rs 550 in the coming 2–3 weeks,” he said. Sunteck’s stock settled at Rs 489.25 on the BSE on Friday.

In the third quarter of the previous financial year, Sunteck’s pre-sales registered a 23 per cent on-year rise, while collections jumped 41 per cent.


TEPID IT VIEW

Ahead of the announcements of corporate earnings, Kothari is not gung-ho on stocks of Information Technology companies.

While the sector is performing well, with decent revenue growth, Kothari flagged high employee attrition levels, which was a threat to margins.

He feels that from a broader point of view, the structure of the Nifty IT index isn’t all that encouraging, pointing out the recent declines in heavyweight IT companies as well as those in the midcap space.

“Coming to Infosys, the stock is near a critical support of Rs 1,800. A close below the same might pull the stock towards Rs 1,750 mark. The only hope is that we hear something positive on the result front and this support is held.”

Kothari, however, has a stronger view on TCS than Infosys, saying that with the stock currently trading near the support zone of Rs 3,650-3,600, an upside could resume if that position is held.

“…To conclude so far we are not expecting any fireworks from the IT giants and the price action indicates sideways move.”

The Nifty IT index, which delivered gains worth a massive 42 per cent in FY22 is down 4 per cent so far in the current year.


WEEK AHEAD TRADE

The coming week is a heavily truncated one, with stock markets closed on Thursday and Friday. Key events are the release of corporate earnings results for the fourth quarter of the previous financial year, Kothari said.

For the Nifty50, Kothari sees the 18,100 level as a strong hurdle “since that is the placement of falling trend line and also the 88.6% retracement of the entire fall from 18,350 to 15,700.”

A move above that mark would be viewed as a fresh breakout and could then be followed by a fresh lifetime high, he said.

“On the contrary; a breach of the recent low of 17,600 might bring in further profit booking in the markets and that could drag the index towards 17,400 mark.”

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