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Metals to glitter as Dollar index loses momentum! JSW Steel & NMDC top buys that could give up to 15% return
Most metal stock has seen some healthy price/time correction and are available at favourable risk-reward proposition, as the larger structural uptrend remains intact, said a report from ICICIdirect
The Nifty Metal index has some more steam left despite rallying by about 70 per cent in last one year compared to 25 per cent upside seen in the Nifty50 in the same period.
Most metal stock has seen some healthy price/time correction and are available at favourable risk-reward proposition, as the larger structural uptrend remains intact, said a report from ICICIdirect.
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The Nifty metal index has been regaining upward momentum after three months breather wherein it retraced 80 per cent of June-October rally and now breaking out of 3 months falling channel. Thereby offering favourable risk reward setup at current juncture.
ICICIdirect expects the Nifty Metal index to relatively outperform the benchmark, going ahead, as historically we have observed that metals have inverse co-relation with Dollar index.
Currently, Dollar index logged a breakdown from eight months rising channel. Therefore, falling Dollar index bodes well for extension of rally in metals, said the note.
In December 2021, China had cut its reserve requirement ratio by 50 bps to boost its economic growth. Furthermore, recently there has been a weakness in the Dollar index.
China’s step to cut reserve requirement ratio coupled with the recent correction in the Dollar index augurs well for the metal sector, in general, highlights ICICIdirect.
ICICIdirect handpicks 2 stocks that are top picks from a 3-month perspective:
JSW Steel: Buy| Target Rs 760| LTP Rs 699| Upside 8%
The stock. after a five quarter of strong up move, has witnessed a shallow retracement in the last two quarters and is currently seen rebounding taking support at the rising 12 month’s EMA (currently at 610), thus offering a fresh entry opportunity with a favourable risk-to-reward set up.
ICICIdirect expects the stock to resume its up move and head towards its all-time highs around Rs 773 in the coming month
The stock has already taken eight months to retrace 38.2% of the preceding three months up move (364-773). A shallow retracement signals a higher base formation and a robust price structure.
NMDC: Buy| Target Rs 166| LTP Rs 144| Upside 15%
The stock has witnessed a Change of Polarity as a major long term supply line resistance joining highs since CY14 has reversed its role post a breakout in March 2021 and is acting as a support, signalling a positive bias.
The stock has managed to hold above upward sloping support trend line joining lows since March 2020, highlighting elevated buying demand that signifies inherent strength.
ICICIdirect expects the stock to continue its last two week’s up move and head towards 166 levels as it is the 50% retracement of the entire decline (213-125)
(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.)
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