Small Cap Stock: Chart check: After a 170% rally, this small cap stock could now cross Rs 1,000

The rally in small-cap textile stocks Siyaram Silk Mills Ltd, which is up more than 170% in one year, compared to around 22% rise seen in Nifty50, may not be over yet and investors can hold on room for a possible target above Rs 1,000 in the next 6 months, experts suggest.

The small cap stock with a market cap of nearly Rs 2,700 crore hit a 52-week high of Rs 607 on April 11. The momentum helped the stock break above its trendline connecting April 2018 to April 2022 on the monthly charts.

A break above the trendline signals changes in the trend of an underlying which can be a stock or an index. However, traders should keep an eye on volumes, as a breakout of the trendline with low volumes might not be followed.

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Siyaram Silk Mills, which was trading well above Rs 700 levels in May 2018, came under selling pressure which pushed the stock below Rs 100 in May 2020. But, buying value at levels Lowers helped the stock break through resistance levels to hit a new 52-week high in April.

The fabric and apparel maker has created a strong portfolio of brands largely aimed at Tier II and Tier III cities. Over the past decade, the company has gradually expanded its fabric and apparel manufacturing capabilities and simultaneously managed to reduce debt to equity from 1.0x in FY12 to 0.2x in FY12. FY21, ICICIdirect said in a report.

In terms of price action, the stock is trading above its crucial short and long term moving averages placed at 26, 50, 100 and 200 days which is a positive sign.

The stock is well positioned for a bigger rise towards Rs 1,000 and investors holding the stock can stay invested while fresh money can be rolled out now or down towards Rs 400 for a possible target towards Rs 1,100 over the next 2 quarters, experts suggest.

The stock started its upward movement from Rs 36 (August 2013) to Rs 799 (December 2017), continuously trading above the averages.

“The stock peaked below Rs 763 on April 2019 and the price corrected to Rs 94 on May 2020. Value buying followed and the stock steadily rose to reach Rs 531 on Feb 22” , Bharat Gala, President – Technical Research, Ventura Securities Ltd, said.

“Recently, the stock gave a break of the trend line connecting the years 2018 and 2022. The MACD, KST and Aroon Up/Down indicators suggest the possibility of a strong positive upside. Possible targets are Rs 800-1,100,” he said.

Gala further added that if the stock corrects lower, then the buy levels are Rs 518-Rs 494-Rs 476-Rs 455-445. The stop loss for the trade is recommended at Rs 400.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

Karen J. Nelson