BHEL share price jumps 9% to hit a 52-week high, up fourfold in less than a year; should you buy, sell, or hold?

BHEL share price: Shares of Bharat Heavy Electricals (BHEL) jumped nearly 9 per cent to hit their fresh 52-week high in the morning session on Friday, May 3.

BHEL share price opened at ₹296.90 against its previous close of ₹292.65 and jumped 8.7 per cent to hit its fresh 52-week high of ₹318.15 in morning trade on BSE on Friday, May 3. Around 10:15 am, BHEL share price traded 6.80 per cent higher at ₹312.55 apiece. Equity benchmark Sensex was 0.45 per cent higher at 74,946.70 at that time.

Why is BHEL share price rising?

BHEL share price has been gaining since April 30 when it announced entering into a strategic partnership agreement for the railway signalling business with HIMA Middle East FZE, Dubai. If the stock ends in the green, it will be its third consecutive session of gains.

"BHEL has entered into a strategic partnership agreement for the railway signalling business with M/s HIMA Middle East FZE, Dubai (a wholly owned subsidiary of HIMA Paul Hildebrandt GmbH, Germany). HIMA is the world’s leading solution provider for safety-related automation in the railways and process industries," BHEL said in an exchange filing on April 30.

"BHEL has been supplying locomotives, electrics for EMU/MEMU, propulsion systems, traction motors, traction alternators, traction transformers, etc., to Indian Railways. The partnership with HIMA will further enhance BHEL’s offerings to Indian Railways," the company said.

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Meanwhile, Abhilash Pagaria, the head of Nuvama Alternative and Quantitative Research, believes BHEL is among those midcap stocks that may be moved to the large-cap segment in the next AMFI categorisation.

The cut-off period for this categorisation is from Jan 1, 2024, to June 30, 2024, and the announcement is expected in the first week of July. The categorisation will take effect from Aug 1, 2024.

BHEL share price clocks a fourfold gain in less than a year

BHEL share price has been on a solid uptrend this year so far.

On the monthly scale, BHEL share price is up over 11 per cent in just two sessions in May, after a 14 per cent gain in April and a 9 per cent gain in March. At the level of ₹318.15, the share price of BHEL has surged by 64.5 per cent year-to-date.

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Remarkably, within less than a year, from its 52-week low of ₹77.30 on May 29, 2023, the stock has recorded a remarkable fourfold gain, equivalent to a robust 312 per cent.

 

What should Indian investors do?

Most technical experts underscore that the stock has given a breakout and that the indicators are favourable for the stock's uptrend. However, they also suggest caution and recommend maintaining stop loss to minimise losses.

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Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, pointed out that recently, BHEL surged beyond the critical resistance level of ₹295. This breakout signifies a notable shift in market sentiment, suggesting increased bullishness and potential upward momentum in the stock's trajectory.

BHEL stock has been consistently forming higher highs and higher lows, a hallmark characteristic of a robust uptrend. Patel observed that this pattern underscores the enduring strength and positive sentiment surrounding BHEL as investors continue to demonstrate confidence by bidding up the stock to progressively higher levels.

However, Patel added that a prudent approach is advised despite the prevailing optimism.

"Exercising patience and monitoring the stock closely for a potential pullback towards the 300 level is recommended before considering long positions. This cautious strategy aims to capitalise on favourable entry points while mitigating the risk of entering positions at potentially overextended price levels. By waiting for a pullback, investors can position themselves strategically to participate in the ongoing uptrend while managing downside risk effectively," said Patel.

Foram Chheda, CMT, and the founder of ChartAnalytics.co.in, observed that following a minor resistance near ₹275 in March this year, BHEL stock initiated a breakout in the subsequent month. It has since sustained a positive momentum.

Chheda is positive about the stock as it is above all key moving averages.

"The stock has been exhibiting a pattern of forming higher tops and higher bottoms since November last year. Furthermore, it remains positioned above all key moving averages including the 50-day, 100-day, and 200-day moving averages, thus affirming a bullish trend," said Chheda.

"It is advisable to maintain one's position in BHEL, with a potential upward movement anticipated towards the vicinity of ₹345 levels. Should the price register a decline below ₹276, it may be prudent to regard this as a trailed stop loss level for booking of profits and exiting the stock," Chheda said.

Milan Vaishnav, CMT, MSTA, the founder and technical analyst of Gemstone Equity Research and ChartWizard FZE pointed out that BHEL has been in a strong uptrend ever since it achieved a breakout from a falling channel and crossed above ₹140.

"It has broken out again from a bullish ascending triangle and remains in a strong uptrend while getting overbought on the charts. Since the uptrend remains firmly in place, it is suggested that one must stay invested in the stock and trail their stop-loss level higher to ₹273, which happens to be the nearest basing point. Fresh entry, however, may be avoided as the stock may continue to rise but a fresh entry would come with an adverse risk-reward ratio," said Vaishnav.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.