Multibagger in 1 year! Bharat Electronics hits fresh record high in April; time to hold on or book profits?

The defence stock rose from Rs 97.55 as on 31st March 2023 to Rs 221 recorded on 2nd April 2024 which translates into an upside of 126% in a year.

Tracking the momentum, the stock hit a record high of Rs 225 on 3rd April 2024, but as the stock is heading towards overbought levels some profit booking could be on the cards.

is a Navratna PSU under the Ministry of Defence, Government of India. It produces advanced electronic products for the Indian Army, the company website showed.

Jefferies India anticipates 2x growth in domestic defence spending over FY24-30, which should drive further upside in stocks like (HAL), Data Patterns, and Bharat Electronics (BEL).

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What is fuelling the rise?

The price chart of BEL is in the long-term uptrend with prices continuing to create fresh all-time highs from the last 5 months. The Supertrend indicator also triggered a bullish signal on the daily charts earlier this week.

“From the perspective of Elliott Wave Theory, prices are exhibiting 3rd wave since the bottom of 18.65 made in the month of March 2020,” Aditya Thukral, Founder & Analyst for AT Research & Risk Managers, said.

“The 3rd wave is the strongest in an impulsive structure of Elliott Waves and has fuelled this rally which is now extending closer to 461.8% of wave 2 correction,” he said.

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What should investors do who are holding the stock?

As far as the current move is concerned, the prices are in the last stages of completion of the 3rd wave where multiple divergences can be seen between prices and the Relative Strength Index (RSI).

The daily Relative Strength Index (RSI) is placed at 69.7. RSI below 30 is oversold and above 70 is considered overbought, Trendlyne data showed. The daily MACD is above its center and signal Line, this is a bullish indicator.

“Investors should tighten their stop losses below 215 on a weekly closing basis which is the previous swing high of the rally,” highlighted Thukral.

“If the current breakout is the continuation of the 3rd wave rally, prices will not easily close below 215 which is an ideal way to earn maximum profits in trending stocks,” he said.

Time to Put Fresh Money?

As prices are exhibiting multiple divergences where prices are making fresh highs while RSI is making lower highs, fresh buying is not recommended, suggest experts.

“Traders can avoid putting in fresh money at current levels rather profit booking can be given a thought around 230 levels,” recommended Thukral.

“However, there’s a strong demand zone near 180-190 levels. The correction in prices if occurs in the form of sideways move can be looked at as buying opportunities,” he said.

Analyst Disclaimer: The Research Analyst and its associates/relatives may from time to time, have a long or short position in the securities or derivatives thereof of companies discussed herein. SEBI Registration No. INH000013794.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)