This Relative Outperformer Soars 4%, Breaks Trendline!

  • Stock Market Analysis

The mood of the Indian markets seems better than in the previous session. The benchmark Nifty 50 index surged 0.4% in the opening session, but selling pressure from the top resulted in losing almost of all of the gains and currently, the index is trading 0.08% up at 16,995, by 10:10 AM IST. 

One stock that is coming on investors’ radar is Manappuram Finance Limited (NS: MNFL ). It is a small-cap consumer finance company with a market capitalization of INR 8,396 crores and currently trades at a P/E ratio of 6.32 and a dividend yield of 3.02%. In FY22, the company recorded a 3.9% YoY fall in the net revenue to INR 6,126.32 crores and consequently, the net income fell 22.95% to INR 1,328.45 crores in the same period.

Image Description: Daily chart of Manappuram Finance with volume bars at the bottom

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The share price of Manappuram Finance rose to a high of INR 103.35 so far, translating into a gain of 4.18% over the previous session. The daily chart structure of the stock is looking quite lucrative as the stock surged past its falling trendline resistance in today’s session which might work as a catalyst to resume the ongoing rally.

After making a short-term bottom of INR 90.5 on 26 September 2022, the stock had been rallying in a one-way direction, clearly outperforming the broader markets. Even today, when the NIFTY Smallcap 100 index is up 0.28%, the Manappuram shares are up 3.48%. This shows investors are becoming increasingly bullish on the stock especially ahead of the festive season. People tend to increase their spending on big items such as automobiles, home appliances etc. during the festive season on account of heavy discounts hence this time of the year is cyclically good for consumer finance companies.

As the stock has risen above its falling trendline, the uptrend in this counter is expected to resume. The volume for the day so far has been recorded at around 3.44 million shares (in a 1-hour trading window) which has almost reached the 10-day average volume of 4.19 million shares. Therefore, volume support is also there on this up move.

A closing above the trendline resistance of INR 102.7 would further confirm the breakout signal. Another bullish signal being witnessed today is that the stock also rose above its previous swing high at the same time. 

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