Multibagger defence stock staring at trend reversal? Here's what analysts say

Shares of Solar Industries India have fallen 16% from their record high in over 1.5 months. The defence stock, which hit a record high of Rs 17,805 on June 30 this year, was trading at Rs 15,010 in the afternoon session today. The defence sector stock has clocked multibagger returns of 245% and 1374% in two and five years, respectively. 

In the current session, the stock was trading at Rs 15,010 against the previous close of Rs 15,104.70 on BSE. Market cap of the firm stood at Rs 1.35 lakh crore. Total 4268 shares of the firm changed hands amounting to a turnover of Rs 6.43 crore on BSE. The stock had a beta of 0.9 in the last one year, indicating low volatility during the period.

In terms of technicals, the relative strength index (RSI) of Solar Industries India stands at 51.1, signaling the stock is trading neither in the overbought nor in the oversold zone.

 Analysts expect the multibagger stock to reverse trend in the short term. 

Osho Krishan of Angel One expects the stock to indicate the potential for a counter-trend. 

"Solar Industries has recently experienced a phase of profit-taking following a significant rally from a low of Rs 8,477 to an unprecedented high of Rs 17,809. The stock has since retracted over 38.20%, approaching the 100-DEMA on the daily chart. Current technical indicators suggest the stock has entered an oversold condition, and it is beginning to demonstrate signs of stabilization, indicating the potential for a counter-trend. From a technical perspective, the recent swing low in the Rs 13,600 zone is anticipated to serve as a support level for the stock. Furthermore, a decisive movement above Rs 15,600, corresponding to the 23.60% Fibonacci level, could initiate the primary upward trend for the stock."

Amruta Shinde, Research Analyst at Choice Broking said, "On the daily timeframe, the formation of a bullish hammer pattern suggests the presence of buyers, and a decisive breakout above this level could reinforce bullish sentiment. Additionally, the stock is taking support near its 20-week EMA, indicating that buying interest remains intact. On the daily chart, Solar Industries is trading above the 20 EMA and 200 EMA and has just closed above the 50 EMA — a sign of sustained buying interest. The RSI stands at 51.12 and is moving sideways, reflecting a phase of indecision.A decisive close above Rs 15,500 would confirm a reversal in the stock, potentially paving the way for a rally towards Rs 16,000. On the downside, Rs 14,280 and Rs 13,630 could serve as major support levels; any bullish price action near these zones may present attractive buying opportunities. The stock has recovered from its recent lows, showing early signs of a rebound."

Shitij Gandhi, Sr.Research Analyst (Technicals), SMC Global Securities said, "The stock has demonstrated a significant upward trend, surging from the Rs 8,000 level to Rs 18,000 over several months. However, in recent weeks, profit booking has led to a pullback, with prices retracing to the Rs 14,000 level. 

At present, the stock has found support at its 100-day Exponential Moving Average (DEMA) on the daily chart and has rebounded sharply, reclaiming the Rs 15,000 mark. The price remains well-positioned above multiple key moving averages, reflecting robust short-term strength.

Given the current setup, the sentiment appears conducive to a renewed upward move, with an initial target of Rs 16,300. Strong support is expected near the Rs 14,000 level. Additionally, positive divergences in secondary oscillators, coupled with supportive volume activity, reinforce the potential for the next upswing in prices."

Solar Industries is an India-based manufacturer of industrial explosives for the mining and infrastructure sector. The company offers industrial explosives and defence products.