The Oil India stock has seen robust upside momentum in recent weeks, surging to fresh all-time highs. With a slew of positive factors aligning, is this the right time to buy Oil India shares? Let’s analyze in detail.
Oil India Breaks Out on Heavy Volumes
Oil India has demonstrated an emphatic breakout on the daily chart in the last few trading sessions. This upside breakout was accompanied by significantly higher volumes, indicating strong buying interest.
On December 21th, the stock exploded nearly 15% higher on 6-times the average daily volumes. This heavy volume breakout signals an increased participation by institutional investors in the Oil India uptrend.
Indicators Validate the Bullish Momentum
The 14-period Relative Strength Index (RSI) has validated the bullish momentum by registering a positive crossover. This crossover occurs when the RSI rises from below 50 to above 50.
Historically, such RSI crossovers have preceded the start of a new uptrend in Oil India stock. So this adds credence to the sustainability of the ongoing rally.
Lower End Support Lies at ₹340
On the daily time frame, Oil India stock has strong support around ₹340. This level has prevented any meaningful downside over the past few weeks.
As long as the stock holds above this support zone, the foundations remain solid for the uptrend to continue. Any dip towards 340 can be utilized as a low-risk buying opportunity.
Upside Price Targets
With the breakout backed by strong volumes and a bullish RSI crossover, Oil India has room to scale higher peaks. Immediate upside targets are visible at ₹400 and ₹420.
The stock had previously faced stiff resistance around 400. However, with the renewed buying momentum, this barrier is likely to be taken out.
The 423 mark is the all-time high for Oil India. A decisive move above this will open the gates for a rally towards uncharted territory.
Key Positives Driving Oil India Higher
Apart from the strong technical breakout, there are a few fundamental factors that bode well for Oil India:
1. Surging Crude Oil Prices
As a major oil producer, Oil India benefits significantly from higher crude oil prices. Brent crude has surged over 75% in 2022 and continues to hold above $80 per barrel. This expanding profit margin is a key catalyst for Oil India.
2. Higher Gas Production
In the latest September quarter results, Oil India recorded a 16% jump in gas production from the same period last year. This sharp expansion in output allows for better fixed cost absorption, thereby improving profitability.
3. Robust Earnings Growth
On the back of elevated oil prices and higher gas volumes, Oil India’s earnings per share has witnessed robust 42% growth in the trailing twelve months. With prices expected to remain high, earnings growth momentum can persist.
4. Attractive Valuations
Despite the recent uptick, Oil India continues to trade at reasonable valuations of around 4 times trailing earnings. This is at a significant discount to global oil majors. The cheap valuation provides a margin of safety.
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Conclusion – Oil India Offers Favorable Risk-Reward
In summary, Oil India stock has seen a resounding breakout this month, backed by strong volumes and bullish indicators. Technically, the uptrend remains solid as long as 340 holds.
With crude prices still elevated, earnings growth in good shape and valuations appealing, the fundamental backdrop looks positive too.
Therefore, Oil India offers an attractive risk-reward profile for investors. The stock can be accumulated on dips for a rally towards 400 and 420 in the coming months. Only a decisive close below 340 would negate the bullish view.