ICICIdirect recommends buying Tata Communication in the range of Rs 389-396 for target of Rs 455 with stop loss of Rs 358 for 3 months on a closing basis.
Commenting on the rationale, the stock broker said, "Tata Communication has been an outperformer in the telecom space. The stock has given good returns in the last couple of months whereas other stocks from the telecom space have broadly remained flat during this period. It remained broadly sideways in the last month but seems to be coming out of the consolidation as volumes are picking up with stock upsides.
After seeing a breakout from the seven-month consolidation at Rs 320 levels in May, the stock remained sideways in the range of Rs 365-385 in June. It has given a breakout above this consolidation again and may see a good surge in the coming sessions.
In the futures segment, the open interest in the stock has started increasing since the June series. It is currently almost 20% higher than the June series. Fresh long positions were formed in the stock when it surpassed its 2010 highs of Rs 370. We expect accumulation of these long positions to provide further momentum in the stock in the days to come. It is likely to test Rs 455 levels in the near term.
The recent up move from Rs 370 levels was seen on the back of significantly high delivery based buying. The last five sessions witnessed delivery buying of more than 4,50,000 shares against an average of 3,00,000 seen in last month. We expect the stock to remain buoyant while lower levels of Rs 370 should act as an important support for the stock."
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