Charting Technicals: Investors can expect a multi-year bull run in Wipro

NEW DELHI: Even though Wipro has reported a marginal QoQ decline in its net profit figure, but upbeat projection as well as positive commentary from the management are leading many analysts to conclude that there is more steam left in the stock.

As anticipated, Wipro’s first quarter performance lagged its peers, including TCS and Infosys. However, analysts feel that Wipro is showing definite signs of revival in its growth momentum.

On Friday, the IT major reported a 2.7 per cent increase in its consolidated net profit at Rs 1,623.3 crore in the first quarter of the current financial year compared with Rs 1,580.2 crore in the year-ago period.

On a sequential basis, its net profit was down 6 per cent from Rs 1,728.7 crore reported in the fourth quarter of the previous financial year.

Technically, after moving in a sideways manner, the stock is finally showing signs of strength. It has surged over 17 per cent since June, as of data collected on July 26.

At present the short and medium-term trend for the stock is bullish, say analysts. They expect the stock to rally over Rs 400 in the short term.

Since the beginning of 2011, Wipro has been trading with a sideways to bearish bias. The entire sideways activity has unfolded in a channelised manner.

“In terms of price pattern it has taken form of a Bullish Flag pattern. Since the last couple of months, the stock is on an upward trajectory and is heading towards upper end of the flag pattern,” said Gaurav Ratnaparkhi, Technical Analyst. Sharekhan.

“Once the pattern breaks out on the upside, which will occur beyond the level of Rs 463, one can expect a multi-year bull run in this counter,” he added.

With all the positives, in the short term the stock may deliver lower growth compared to the peers and does not see any margin improvement potential in the near term.

Wipro has guided better growth rates for 2QF14 suggesting some improvement in performance. The company expects revenues from the IT services business for the current quarter that ends Sept 30 to range between $1.62 billion and $1.65 billion, a sequential increase of 2 per cent to 3.9 per cent.

Most analysts are of the view that the restructuring initiatives taken by the company have not yet started showing off and will start reflecting in the financials of the company in due course.

We have collated recommendations from various analysts on how is Wipro likely to perform in the short to medium term:

A K Prabhakar, Senior Vice President - Equity Research at Anand Rathi:

Wipro has been in a trading range of Rs.325-450 for almost 4 years starting from 2009. Now, I expect the stock to go higher and start trading in and around Rs 450 levels very soon. Buy the stock on any dip for a target of Rs.450 or even higher. On daily charts, the stock has completed Cup & Handle pattern. The depth also suggests similar targets of Rs.440-450
Renu Goel - Analyst, Derivatives & Technical Research at Trend-Wise:

At present the short & medium term trend for the stock is bullish. We have a short to medium term target of 418 (see falling gap on chart) and if this is surpassed, then above it retest of highs around 450 can be expected. Recently, the stock conquered resistance at Rs 360 which should now change the polarity and is expected to be a key support level to watch out for.