ICICIdirect recommends buying Mahindra & Mahindra (M&M) in the range of Rs 1,197-1,217 for target of Rs 1,425 with stop loss of Rs 1,108 for 3 months on a closing basis.
Commenting on the rationale, the stock broker said, "Stocks from the four-wheeler space had remained sideways in the last couple of months as adverse monsoon forecasts dampened sentiments as fears emerged of lower sales numbers. However, with increased FII flows in Indian markets and positive announcements from company managements, stocks like Mahindra & Mahindra (M&M) have started to witness renewed buying interest.
M&M witnessed long liquidation last month and the OI declined from 3.3 million shares to 1.7 million shares. The July series has started with almost 30% lower open interest than the June series clearly indicating closure of momentum long positions. Meanwhile, M&M declined to Rs 1,150 levels from Rs 1,250. However, we have started to observe a build-up of fresh long positions. The stock is likely to witness a fresh up move towards new highs. We expect M&M to test Rs 1,425 levels in the near term.
M&M witnessed a block trade of 8 million shares near Rs 1,100 level on May 14, 2014. Despite the recent profit booking, M&M remained above these levels. We expect this level to remain an important support in the near term.
The highest Call base for M&M is placed at the in the money 1200 strike. In the last couple of sessions, the stock has been trading above these levels. We believe Call option writers have been caught on the wrong foot. The stock may continue its positive bias in the July series on the back of short covering in this strike.
In the current up move starting from June 2014, M&M has continuously found support near its 50 DMA levels and did not spend much time below it. Recently, M&M has once again found support near the 50 DMA levels placed at 1,150 and observed a fresh up move."
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