Maruti Suzuki share price looks set to rally 12%; technical charts suggest fresh entry opportunity

Maruti Suzuki shares look set to witness the next leg of up move in the coming months, as suggested by the trends on technical charts. According to the reports, the passenger vehicle festive demand for Maruti Suzuki has been healthy. Research and brokerage firm ICICI Direct said that slower pace of retracement helped Maruti Suzuki stock to form a higher base above 10 weeks EMA. The share price has formed a higher base (Rs 7350-6270) after witnessing the strongest rally (82% off March low Rs 4001) since December 2017. “Currently, the stock is on the verge of resolving out of ongoing consolidation, which would open the doors for the next leg of up move. Hence, this offers a fresh entry opportunity,” analysts at ICICI Direct Research said.

The technical charts suggest that Maruti Suzuki stock witnessed a slower pace of retracement as over the past 10 weeks it has merely retraced 61.8 per cent of the preceding eight week’s rally (Rs 5750-7350), at Rs 6361, indicating healthy consolidation that has set the stage for the acceleration of upward momentum. The brokerage firm has given a target price of Rs 7,810, implying a 12 per cent up move with a stop loss at Rs 6,650.

Fundamentally, in the long run, the company is well placed to capitalise on rising penetration of PVs in India, accompanied by a rise in income levels. On the balance sheet front, MSIL is a net debt-free company with surplus cash amounting to Rs 35,000 crore as of FY20 (16% of MCap). While Maruti Suzuki is facing increased competitive intensity in UVs from the new launches by rivals and entry of newer players in India.

According to the brokerage firm, Maruti Suzuki has led the charge, with robust retail offtake in May-September helping maintain retail market share at 50 per cent. The industry-wide move towards smaller cars suits MSIL given its dominance in the entry-level segment. “Recent growth momentum is cause for encouragement but volume sustainability post-November would need to be monitored amid an element of channel restocking carried out in September,” it said. Besides, the company’s overall production capacity is set to be increased by 2.5 lakh units per annum from FY22E onwards to 22.5 lakh units per annum as the third line of Suzuki Motors Gujarat in Hansalpur, Gujarat has been set up.