Watchlist: Stock Gains 4%, Hovering ‘Just Below Resistance’!


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The Indian markets delivered high opening gains at the opening tick, all thanks to a better-than-expected October 2022 US CPI of 7.7%, which was significantly lower than the preceding month’s rise of 8.2%. This has essentially painted a bullish picture for the global markets.

Many stocks could be witnessed reversing their losses from the previous weak session while some have delivered new breakouts, as investors’ buying spree seems to be coming back on track. One stock that is just hovering at a key resistance level, waiting for some more force to deliver a breakout is Happiest Minds Technologies Limited (NS:). 

It is a digital transformation IT consulting & services company with a market capitalization of INR 13,758 crores. The IT space has been the best-performing sector in today’s session as the rose over 7% in yesterday’s US session, therefore, going with IT stocks could be fruitful in the near future. 

Image Description: Daily chart of Happiest Minds Technologies 

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The stock had been taking a plunge since it made a short-term top of INR 1,136 on 19 August 2022. Since then investors have been getting out of the stock, resulting in a downtrend. The peaks during this time can be joined to form a falling trendline which has been acting as a strong resistance and kept the stock from rising further, so far.

Now, the stock is looking all set to break above this resistance which would become valid once it crosses the key level of INR 1,000. Currently, the stock is up 3.4% to INR 994.5, by 10:29 AM IST, totally reversing the previous session’s 0.95% loss. 

This is purely a technical view. From the valuation perspective, the stock seems a bit stretched. The current P/E ratio of the company stands at 75.93, which is noticeably higher than the industry’s average of 25.7. The price-to-book ratio is also on the higher side, at 20.66. The market seems to be giving premium valuations to the stock, primarily due to its aggressive growth in recent years.

The company has more than doubled its income for the last 5 consecutive years, delivering a CAGR of 111.91% and a record-high profit of INR 181.2 crores in FY22. The profit on a TTM basis is even higher, at INR 216.78 crores. The growth is definitely visible in the stock, however, the valuations are also not cheap. 

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