GVKP Trading Buy Target :23

GVK POWER& INFRA Trading Buy Target: 23

Ø GVK, a Hyderabad based company that operates in the Power, Road and Airport segment. GVK's energy portfolio currently features six power projects which are being developed across several states in the country. Currently power projects are present in the states of Andhra Pradesh, Jammu Kashmir, Punjab and Uttarakhand.

Ø In the current economic scenario the infrastructure sector is heavily pressurized by high interest costs and high input costs. The profitability of the sector has his been greatly impacted with decline in order intakes and high raw material costs. With the softening of interest rates, decline in commodity prices and pick up in capex sector will only pick is likely too.

Ø On fundamental side market has now started discounting the results which on face of it, it looks negative because if you see all these infra stocks where the huge debts are lying in the books of the company because of their PPP projects so, we feel post the state elections we can see that reforms will be given a big push triggering the positive for all the infra companies.

Ø We feel that the major concerns for the stock are overdone as of now. Looking at the futures activity the Open Interest in the stock is rising since Jan expiry along with positive price action indicating some long accumulation in the stock. The open interest in the stock is 46mln shares indicating not much leverage position in the stock as it’s just half from its peak of 71mln shares.

Ø Stock has been consolidating for a long time between Rs. 15-17 which can be interpreted as midway in its uptrend. So in that sense there is still sufficient steam left.

Ø According to Our systems the stock has triggered a buy on the intermediate charts (Weekly time frames). According to us RSI oscillator is also on rising mode that makes upside momentum reliable. Technically stock is poised at 17.75 levels stock has taken support at Rs.10 from where it bounce back. It has witnessed a highest volume on weekly basis in last one year indicating a huge accumulation. Triggering a break out on the falling trend line.(see the chart attached)

Ø We suggest going long on GVKPIL at CMP 17.75. With a Stop: Rs.16 with an immediate Target of Rs 23.