Nestle India – Buy

Yoganand D. | Updated on March 12, 2018


Investors with medium-term perspective can consider buying the stock of Nestle India (Rs 3,461.1). It has been on a long-term bull-run from its 2004 low of Rs 500, forming higher peaks and troughs.

In November 2009, the stock took support from its long-term base at Rs 1,300 and resumed its uptrend. However, the stock was on a medium-term corrective decline from its all-time high of Rs 4,199 marked in November 2010 until it found support around Rs 3,200 (October 2010 trough).

Taking support from this level and also triggered by the positive divergence displayed in the daily relative strength index and price rate of change indicator, Nestle India bounced up 6.7 per cent last week. Moreover, 200-day moving average also provided support around Rs 3,200. We notice that there is an increase in weekly volume in the past two weeks. The stock has crossed its 21-day moving average and is hovering well above its 200-DMA.

Both daily and weekly RSI are inching higher in the neutral region towards the bullish zone whereas monthly RSI is hovering in the bullish zone. Daily price rate of change indicator has entered into the positive territory signalling emerging buying interest for the stock. The daily moving average convergence divergence indicator has indicated a buy and is heading towards positive territory.

We are bullish on the stock from a medium-term perspective. We believe that Nestle India has the potential to trend higher and touch our medium-term target of Rs 3,900; however we don't rule out a minor pause around Rs 3,700.

Taking into consideration the volatility in the broader market, investors can consider accumulating the stock in declines between Rs 3,350 and Rs 3,460, with medium-term stop-loss at Rs 3,240.

Follow up – Gitanjali Gems (Rs 235.6)

After rallying to an intra-week high of Rs 250, the stock is pausing around Rs 245 in line with our expectations. It ended the week in a positive note by gaining 4 per cent accompanied with above average weekly volume. Medium-term outlook remains bullish for the stock and we reiterate our buy recommendation with target and stop loss mentioned last week.

(This recommendation is based on technical analysis. There is a risk of loss in trading.)

Published on February 20, 2011

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