Today’s pick is NTPC [stockquote]NTPC[/stockquote]. The stock started the year with a surge to Rs. 190 levels, and soon lost its mojo to drop down to Rs. 140 levels by mid of May. Since then the stock has been on an uptrend with some correction on the way. In the last three months, the stock has moved -9% vs. +4% of the Nifty’s.
Oscillator RSI and CMO are hovering in no man’s land. The stock is trading in the middle of Bollinger band not giving any directional bias. Short-term technical just saw a 18×9 bearish crossover.
The MACD line and the signal line are moving very close to each other unable to provide any direction for the stock. Also, both long-term and short-term GMMA lines are very close to each other not giving any direction to the stock.
NTPC’s average correlation with the Nifty is 0.57 which is positive and quite strong. The scrip will be replicating movement of Nifty. [stockquote]NIFTYBEES[/stockquote]
NTPC has a historical volatility in the range of 0.3 to 0.7. The scrip’s volatility is currently in the lower end of the range.
Given these technicals, we suggest a short-term Sell. For the long-term, we will have to wait and watch how the GMMA lines unravel themselves. However, we suggest having trailing stop-losses in case sudden trend-reversal were to take place.
The government is selling its 9.5% stake (78.3 Cr shares) at a floor price of Rs. 145 per stock, a discount of Rs. 10 per share. The stock is currently trading at a PE of 13.05, a price of Rs. 145 will bring it down to 12.17, lesser than comparables. With the US power industry rotating from coal to domestic natural gas, we expect the international price of coal, the main input cost for NTPC, come down over a period of time. We give the government’s OFS a BUY at this price.
