The IT stock is down by more than 20 per cent from its 52-week high of Rs 1,377 recorded on 24 September 2021 to Rs 1,054 on 13 May 2022 which effectively puts the stock in a bear market.
The definition of a bear market is when the index declines by at least 20% from its prior peak. For more on the bear market
The stock took support near Rs 1,028 level in May before bouncing back. A bounce back from the said level translates into completion of the ABC pattern on the weekly charts.
ABCD patterns consist of two equivalent price legs. It is widely used by traders to identify bullish and bearish reversals.
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HCL Technology is on an accelerating growth trajectory. We have a buy rating on the stock for a target of Rs 1,380. For traders, a stop loss can be placed at Rs 1000, says Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.
Investors with a long-term horizon can look at buying the stock at current levels or on dips for a potential target of Rs 1,380 with a 12-month horizon, suggest experts. A stop loss below Rs 1,000 can be kept for all long positions.
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd highlights 3 reasons why the stock is a buy after a sharp selloff:
Firstly, it has completed a corrective ABC pattern at Rs 1,030/1,040 level. Secondly, the Nifty IT index is on the verge of completing a corrective pattern between 30,000 and 28,500. Currently, it is at 29,800.
Lastly, the stock is fundamentally attractive at current levels. It is a combination of technical and fundamentals.
HCL Technologies offers enterprises an integrated portfolio of products and services through three business units. These are IT and Business Services (ITBS), Engineering and R&D Services (ERS), and Products and Platforms (P&P).
The IT company has guided for revenue growth of 12-14% for FY2023E but reset EBIT margin guidance to 18-20% from 19-21%, which is on expected lines.
Decent deal wins, healthy metrics, point towards strong FY2023E in services. “We expect earnings to grow by 8.6% in FY23E and 15.5% in FY24E,” said Chouhan.
HCL Technology is on an accelerating growth trajectory. We have a buy rating on the stock for a target of Rs 1,380. For traders, stop loss can be placed at Rs 1,000.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)