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Published: September 19, 2024
Updated: September 19, 2024

Cochin Shipyard Stock Soars 10% After Four-Day Decline: A Strong Comeback?

Significant Surge After a Dip

Cochin Shipyard's shares rebounded sharply on Friday, putting an end to a four-day losing streak. The stock rose by 10%, reaching an intraday high of ₹1,846.55. Despite this surge, the stock remains 37.98% below its all-time high of ₹2,977.10, which it achieved in July 2024. However, on a year-to-date (YTD) basis, Cochin Shipyard has provided multibagger returns, rallying by an impressive 170.94%.

Momentum in Defence Stocks

Defence stocks, including Cochin Shipyard, have been in a consolidation phase for the past two and a half months. According to Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, buying interest is now beginning to emerge in this sector. Bathini suggests that investors with a long-term outlook should hold onto their positions in defence stocks, while new investors could consider entering on market dips.

Technical Analysis: Support and Resistance Levels

From a technical perspective, Cochin Shipyard has key support levels at ₹1,800, ₹1,700, and ₹1,630. On the upside, resistance is anticipated between ₹1,860 and ₹2,050. Osho Krishan, Senior Research Analyst at Angel One, pointed out that the stock has experienced a steep correction of nearly 40% from its lifetime high. This has driven the stock into oversold territory on technical charts, with ₹1,630 likely to act as a cushion to further declines.
Krishan expects the stock to see positive traction if it surpasses the intermediate resistance level of ₹2,000. Similarly, Jigar S Patel, Senior Manager at Anand Rathi, highlights that the stock could trade between ₹1,700 and ₹1,950 in the short term, provided it holds support at ₹1,700 and breaks through resistance at ₹1,860.

Market Insights and Expectations

Ravi Singh, Senior Vice-President at Religare Broking, expects the stock to potentially reach ₹2,050 in the near term, provided it does not fall below the ₹1,800 support level. He recommends a strict stop-loss at ₹1,800 for traders looking to capture further upside potential.
Cochin Shipyard’s stock currently trades above its 5-day, 10-day, 150-day, and 200-day simple moving averages (SMA), while it lags behind the 20-day, 30-day, 50-day, and 100-day SMAs. The 14-day relative strength index (RSI) sits at 42.64, indicating that the stock is not oversold or overbought, which may suggest further room for movement in either direction.

Fundamentals: Promoter Holding and Valuations

In terms of company fundamentals, Cochin Shipyard boasts a price-to-equity (P/E) ratio of 49.93 and a price-to-book (P/B) value of 8.79. Its earnings per share (EPS) stand at ₹33.62, with a return on equity (ROE) of 17.60%. The company's promoters hold a strong stake, owning 72.86% of the company as of June 2024.
Cochin Shipyard's 10% surge marks a significant rebound after its recent downturn, with technical indicators pointing to a potential continued upward move. Investors should, however, remain cautious, watching critical support and resistance levels, and consider market dips for potential long-term investment opportunities. The stock’s strong fundamentals and momentum in the defence sector may continue to attract both retail and institutional interest in the coming weeks.