Pick Of The Week: This Tata Stock Looks Attractive Bet, Target Price Set At Rs 10,238 - A Technical View!

Bulls favoured IT stocks mightily in the trading week that ended on December 15th, and the trend is expected to continue. While large-cap tech giants have shown remarkable upside by hitting new highs, there is one Tata stock that is flirting closely near its 52-week high. Brokerage BP Wealth has selected Tata Group-backed midcap IT stock Tata Elxsi has pick of the trading week from December 18-22nd.

Last week, on Frida, Tata Elxsi's share price ended at Rs 9,057.85 apiece, up by Rs 85.15 or 0.95%. The stock is a little over Rs 100 away from crossing its 52-week high levels of Rs 9,180 apiece. In this trading week, the stock price zoomed by more than 7%. {image-tata6001-1702745046.jpg www.goodreturns.in}

Year-to-date, Tata Elxsi shares have advanced by nearly 44% on the exchange. It is also among the top dividend-paying stocks. So far in 2023, the company paid a dividend of 606% aggregating to Rs 60.6 per share. Its dividend yield is at 0.7%.

In its pick of the week report, BP Wealth said, "The pattern analysis on the weekly outlook of the IT index shows that the price action is trading laterally within the first stage and shows early signs of inching closer to transit into the stage 2."

With that, the brokerage anticipates a potential upside in Tata Elxsi offering a favorable risk-to-reward ratio.

Data from BP showed that the pattern analysis on the daily timeframe shows that the price action is trading within a volatility contraction pattern and in its stage 1 and potentially indicates smart hand participation. It added, "The trimming of bases at elevated levels by means of price depth and time correction indicates the behavior of supply absorption at elevated levels."

Also, the brokerage said, "The tightness in price action observed ahead of the breakout shows potential accumulation not just to bolster the breakout, but the potential in upside strength." Moreover, this further is replicated by the highest volume recorded in the year as the price staged the breakout on 12th December.

Hence, BP's note said, "The stocks display high EPS strength and buyers demand which is a positive sign," adding, "We reckon a buy on Tata Elxsi from CMP-8714 for the target of 10,238 and sell stop at 8303."

From the current market price, Tata Elxsi has a potential of 13% upside ahead.

In the second quarter of FY24, Tata Elxsi recorded healthy earnings with net profit rising by 5.9% QoQ and 14.8% YoY to Rs 200 crore, while revenue from operations climbed 3.7% QoQ and 15.5% YoY to Rs 881.7 crore. On a constant currency basis, the revenue growth stood at 3.4% QoQ and 10.1% YoY. Also, the company's Industrial Design division crossed Rs 100 crore for the first time in company history, growing 35.4% YoY. Tata Elxsi continues to invest in talent, adding 585 employees during the quarter.

Tata Elxsi is among the world's leading design and technology services providers across industries, including Automotive, Broadcast, Communications, Healthcare and Transportation. The company is engaged in enabling customers reimagine their products and services through design thinking and applying digital technologies such as IoT (Internet of Things), Cloud, Mobility, Virtual Reality and ArtificialcIntelligence.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.