Defence stocks: HAL poised for a historic peak; BDL, BEL test key levels

HAL sets to hit new all-time and may rise up to 9 per cent. BDL and BEL need to cross key hurdles to breakout.

Shares of Defence companies are in the spotlight, following the signing of major MoUs (Memorandum of Understanding) for various projects. Bharat Electronics has signed an agreement with Isarel Aerospace Industies (IAI) for manufacturing its artillery weapon system domestically, boosting “Make in India” initiative.

Similarly, Hindustan Aeronautics signed an agreement with Safran Helicopter Engines for jointly developing helicopters engines.

Bharat Dynamics signed 10 MoUs with several foreign and Indian companies like Thales, EDGE group entity, AL TARIQ, UAE involving setting up manufacturing facilities for rockets, engineering components, and other precision guided munition in India. 

This development led shares of Bharat Dynamics and Bharat Electronics ascend above their respective 200-day moving average (DMA), while Hindustan Aeronautics shares climbed 8-week high.

All the defence stocks were trading in green on Friday, despite benchmark indices falling 0.25 per cent cut. Bharat Dynamics soared over 4 per cent, while Hindustan Aeronautics and Bharat Electronics were up 1.80 and 0.70 per cent, respectively.

So, will this move assists defence companies to see further rise in their stock prices, from a medium-term perspective? To help you answer this question, let’s consider the technical outlook:-

Hindustan Aeronautics Ltd (HAL)

Likely target: Rs 2,850 and 2,900

Upside potential: 7% to 9%

Shares of Hindustan Aeronautics have overcome the critical hurdles of Rs 2,600 and Rs 2,670 on decisive note. This move has triggered a short-term upside in the stock. From now onwards, Rs 2,570 stays as a closing basis support, with the stock price action aiming a new all-time high of Rs 2,850 and 2,900. The Moving Average Convergence Divergence (MACD) is making an effort to leap over the zero line; when this happens, the trend is expected to add more upward bias. 

Furthermore, the stock resolutely closed over the both barriers of the 50-day moving average (DMA) and 100-DMA placed at Rs 2,513 and Rs 2,506 levels.  CLICK HERE FOR THE CHART

Bharat Electronics Ltd (BEL)

Likely target: Rs 120

Upside potential: 14%

While the stock is presently attempting to absorb all the selling pressure emerging near Rs 100 – Rs 98 level, only a breakout over Rs 105; its next major hurdle, could lead to a build-up of a bullishness. Immediate support for the current trend exists at Rs 94 level.

There is a trendline hurdle at Rs 100, which may prevent stocks from further rise. However, if the stock absorbs all the sell-off and marches over Rs 105, a positive trigger may compel the stock price action towards Rs 120, reaching a new all-time high. CLICK HERE FOR THE CHART

Bharat Dynamics Ltd (BDL)  

Likely target: Rs 1050

Upside potential: 14%

A consecutive close over the hurdle of Rs 950 shall trigger fresh upside in the stock. This move will assist the Relative Strength Index (RSI) to cross 60 value, which it has been tussling since November last year. 

Stability over this hurdle may propel the stock to reach a fresh historic peak of Rs 1,050. The support for the current trend comes to Rs 880 and Rs 850 levels. The broad outlook points to a steady upside, until the stock protects Rs 800 on a closing basis.  CLICK HERE FOR THE CHART