HINDALCO INDUSTRIES: LOOKING EXPLOSIVE ON THE CHART

Hindalco Industries Ltd, one of whose plants is expected to go on steam in this quarter, is looking explosive on the charts and could outperform both the Sensex and Nifty in the coming days. 

The stock has been beaten down too much in the last few days, and now a short covering is expected to take it past Rs.122-123 in the coming days. My bullishness is based on both the Chartical and Fundamental Factors. Some of the fundamental factors which could affect positively are: 

(i) Base metals finished sharply higher on Thursday, as the lingering after-effects of Chairman Bernanke’s comments continued to pressure the dollar, forcing it to slide to $1.3263 against the euro – a three-week low.

(ii) "Growing deregulation will lead to an explosion of interest in global commodity markets from small and medium-sized companies in China and will facilitate western companies’ access to liquidity from the country that is the world's largest consumer of metals". This is the view of John Browning and Tiger Shi, the two senior metal brokers in Newedge Hong Kong. Shi formerly worked for the State Reserve Bureau of the National Development & Reform Commission, then Sempra, before founding the Citic Newedge joint venture in China. “We expect the China market to grow at an even faster pace in the near future. As regulation is removed we will see more companies emerging from China requiring access to international markets,” he said.

Meanwhile, Shanghai Futures Exchange copper prices gained 1.3% this week, albeit widening a discount with its London counterpart as Chinese traders showed reluctance in chasing overseas gains. SHFE August copper settled at 58,470 yuan ($9,259) per tonne on Friday April 27, up from 57,960 yuan per tonne on Thursday, and last Friday’s settlement of 57,710 yuan per tonne. “The widening gap between LME and SHFE copper prices combined with the increasing number of cancelled warrants will constrain any downside risk,” an analyst at Shanghai CIFCO...

This is a massive company and it is strange how the shares are trading near its 52-week low price of Rs.111.25. The long term investors should use this opportunity to corner this scrip, before the real short covering starts and pulls the scrip up to around Rs.135-139, in the coming days.