Suzlon Energy's 15-year bear phase over but supply zone ahead

Sulzon Energy shares have fallen for two straight days now, making traders wonder whether more upside is left for the stock that recently broke above its 15-year long bear phase. With the stock still in overbought zone, analysts see the Rs 19-20 range as the immediate supply zone. Support for the stock is seen at around Rs 14-15 levels.

Osho Krishan, senior analyst for technical and derivative research at Angel One said Suzlon Energy has soared two times in the ongoing financial year amid robust volumes.  He said the stock witnessed a strong breakout around Rs 11-12 level, followed by Rs 15-odd level. The recent rally was vertical in nature, which snubbed in between price-wise corrections, he noted.

"The technical parameters indicate the counter has entered the over-bought territory and one should not be carried away with the ongoing momentum. As far as levels are concerned, a series of support is placed around Rs 15-14 odd zone on an immediate basis, followed by sacrosanct support of Rs 12-12.50. On the flip side, a strong hurdle could be seen around the Rs 19-20 zone in the comparable period," he said.

The stock fell 4.81 per cent to hit a low of Rs 16.62 on BSE. This was in addition to 4.95 per cent drop in the previous session, thus taking the two day fall to 9.52 per cent. The stock clocked a turnover of over Rs 200 crore on NSE within the first 30 minutes of trade.

Big breakout

Santosh Meena, Head of Research, Swastika Investmart said the stock has recently shown promising signs as it emerges from a prolonged 15-year bear market. A significant development for the stock, he said, has been the breakout of a long-term downsloping trendline, originating from its peak in 2008. Meena said Suzlon Energy is exhibiting an encouraging pattern of higher high-lows, with the formation of an ascending Triangle.

"However, it's important to note that the price range of Rs 19–20 may pose a immediate supply zone, potentially impacting further upward movement. Nevertheless, if the recent positive momentum continues, Suzlon's stock has the potential to reach a target range of Rs 28–30 in the near term," he said.

In the event of a pullback, it's worth highlighting that the range of 12–10 is expected to act as a robust demand zone, providing substantial support to the stock price, he added.

On the fundamental side, ICICI Securities said Suzlon Energy is getting back into shape after a ‘rollercoaster’ journey over the last decade due to a slump in industry volumes and high leverage led by the acquisition of Repower in 2008. However, after a series of debt restructuring, net debt has declined sharply from Rs 13,000 crore in FY20 to Rs 1,200 crore as of March. In addition, the industry is looking at a revival led by a slew of policy actions.

ICICI Securities said Suzlon Energy has reduced leverage by restructuring its debt and by raising money through a rights issue. As a result, its leverage was merely 1 time debt/Ebitda. Thus, the company has got all the right ingredients to benefit from industry tailwinds, it said.

Suzlon Energy had, post Tuesday's market hours, said its board of directors will meet on Friday to consider and approve capital raising by way of one or more or combination of permissible methods. The company board will also seek approval of the shareholders, if required.

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