A look at the Infrastructure Sector

One of the worst performing sectors, Infra in recent times has been showing a steady rise though when one looks at the bigger picture, the damage is still very much visible. But then again, if Indian growth story recovery has any merit, Big Infrastructure stocks will be the ones’s which will deliver strong returns compared to the risk. Smaller infra stocks may generate higher return but is more risky in case the sector turns around back to bearish territory.

Lets first look at the CNX Infra Index;

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While the Index has recovered from its lows, there is no sign on the weekly charts signalling any turnaround. The Index consists of 25 stocks (List here) though L&T, Bharti Airtel and NTPC make up nearly 55% of the weights. 

Since the Index composes of too many small tickers as well, this post will instead concentrate on the few biggies and see if there are any opportunities present.

ABB:

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ABB recently came pretty close to the lows it made in the panic of 2008 before bouncing back. While the bounce has been pretty decent, its still not out of the woods as it encounters a major resistance at 700. On the weekly chart (shown above), you can see a formation of a inverse head and shoulder. While not textbook in terms of the placement of the right shoulder, a break above 700 can still be considered a valid neckline breakout for a move up to 900 where it meets its next major resistance point.

BHEL:

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While ABB & BHEL should show similar trends, the fact that BHEL is a PSU means that there is a lower weight for it as against the Multinational ABB. As can be seen in the chart, its still well below its major resistance zone and since it not only broke the 2008 panic lows but went way below, the stock is best avoided unless one wants to punt specifically in BHEL

Larsen & Tourbo

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Between 2012 and now, L&T has moved in a very wide range and is once again close to its major resistance level. The stock having already having made a strong recovery while looking attractive has a higher risk as and when profit booking emerges. 

Siemens:

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The chart of Siemens is more or less similar to ABB though we are yet to see the formation of the right shoulder. A break above 630 though should be a valid reason to buy since the next major resistance zone comes in at 800. On the other hand, if the stock reacts from here, one can establish a long once we sense the right shoulder being formed.

Thermax:

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While Thermax figures on the last stock in this post, its the best opportunity among the stocks we reviewed above since the stock has already given a breakout. Any pull back to the breakout zone of 640 can be used to add to longs with the target being 800 in the next few months.

To conclude, while infra stocks are showing some amount of strength, save for Thermax, the rest of the stocks are yet to give low risk entries. If market continues reacts from here, these stocks are best avoided since being weak, they will be the first to come under pressure.

 

 

 

 

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About Prashanth

Have been a full time participant in the stock markets since 1996. Run a Yahoo Group where focus is exclusively on discussions of the Indian Markets using Technical Analysis as the tool (groups.yahoo.com/group/technical-investor)
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