Buy LIC Housing on dips

We recommend a buy in the stock of LIC Housing Finance from a short-term perspective. It is evident from the charts of the stock that since marking an all-time high at Rs 300 on January 2, the stock has been on a medium-term downtrend. However, significant long-term support in the band between Rs 230 and Rs 240 arrested the stock's decline in late February and early March. Triggered by positive divergence in daily relative strength index, the stock changed direction.

Recently, the stock surged 3 per cent accompanied by above average volume. Both the daily as well as the weekly relative strength indices have entered the neutral region from the bearish zone. The daily moving average convergence divergence indicator has signalled a buy. Moreover, the daily price rate of change indicator has entered the positive territory from the negative territory implying buying interest.

 As the stock is reversing higher from its significant long-term support we take a contrarian view and are bullish on the stock from a short-term perspective. We expect its rally to continue and reach our price target of Rs 259 or Rs 264 in the approaching trading sessions. Traders with short-term perspective can consider buying the stock with stop-loss at Rs 244 levels.

Smart Investor
Equity Research Division

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