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Published on 18/07/2020 11:43:46 AM | Source: ICICI Direct

Quant Pick – Buy Tata Steel Ltd For Target Rs. 410 - ICICI Direct

Posted in Broking Firm Views - Short Term Report| #Tata Steel Ltd #Trading Report #ICICI Direct #Steel

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Quant Pick – Buy Tata Steel Ltd For Target Rs. 410

Derivatives and Quantitative Outlook…

* While the Nifty continues to remain range bound around 10700, the broader market is witnessing a continued recovery. Globally also, the same trend is visible with stocks from the metal space garnering significant buying interest. Domestically, we believe stocks like Tata Steel will resume their fresh uptrend after hovering in a small range for the last one month. We expect fresh longs to be followed by recent accumulation in the stock

* On the F&O front, the open interest in the stock has declined sharply in the last couple of months. The OI in the stock has declined from 25 million shares in June to almost 15 million shares currently. The OI in the stock has been in a declining trend in the last two years due to continued underperformance. Considering the buoyant movement seen in the metals space globally, we expect fresh longs to be formed in the stock, which should take the stock higher

* On the options front, the highest Call base of the stock is placed at 340 strike for the July series. As the stock has finally moved above these levels, sharp closure of positions is visible and is moving into higher strikes. Even in the August series, the highest Call base is at 350 strikes. Thus, short covering is likely to be seen in the coming sessions

* The stock has seen one of the highest delivery based action around | 335 in the June series. Since then, it has remained in a narrow range and been immune to the market volatility. With early signs of the stock moving out of the prevailing range, we expect it to continue its upward momentum

* The 30 day HV for the stock is still high around 60% levels. With relative stability and ongoing accumulation, we expect volatility to decline, which should take the stock gradually higher

* Tata Steel has been finding it tough to move above its long term mean-1*sigma levels in last couple of months despite multiple attempts. However, it has finally moved above these levels placed around | 340. Sustainability above these levels is likely to take it towards its mean levels around | 440 in the coming weeks

Buy Tata Steel Ltd @ 342-352   Target 410 SL 311 Time frame: Three months

 

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