3 PSE Stocks in Overbought Zone: Time to Book Profits?

Indian markets started the Wednesday session on a positive note. However, soon after the positive start, profit booking was observed at higher levels. This is not the first instance where profit booking has occurred at higher levels. Every time the index attempts to move higher, it has not been an easy ride. The upward movement is often met with selling and high volatility.

Rising Volatility and Cautious Approach

Considering the stiff resistance at higher levels and the India VIX continuing to rise, reaching above the 22-mark at a multi-month high, it’s time to adopt a cautious approach. This is especially important for stocks that have seen a rapid rise.

Focus on the Nifty PSE Index

We have shortlisted the Nifty PSE Index, which has been an outperformer this year. Public Sector Enterprises (PSEs) have frequently grabbed headlines this year and are expected to continue doing so. The Nifty PSE Index has jumped 34% this year so far. The index comprises 20 stocks listed on the National Stock Exchange (NSE) where 51% of the company’s outstanding share capital is held by the Central Government and/or State Government, directly or indirectly.

Overbought Stocks from the Nifty PSE Index

Let’s dig deeper and check how many stocks have been trading in overbought territory as defined by the Relative Strength Index (RSI). A stock is considered to be overbought when the RSI is above the 70 mark.

There are three stocks from the Public Sector Enterprises that have reached the overbought territory.

1. Bharat Electronics (BEL)

Navratna Defence PSU Bharat Electronics Ltd (BEL) announced a jump of almost 30% in its consolidated net profit to Rs 1,797.11 crore for the quarter ending March 31 of the financial year 2023-2024 (Q4FY24). The state-owned company had reported a net profit of Rs 1,382.02 crore in the year-ago period (Q4FY23). The company reported a 32% increase in revenue from operations to Rs 8,564.08 crore in Q4FY24 from Rs 6,479.12 crore in the same quarter of FY23. The stock is up by 48% this year so far and is seeing profit booking on Wednesday, being down by 0.90%.

2. Hindustan Aeronautics (HAL)

Hindustan Aeronautics is engaged in the manufacture and repair, maintenance of aircraft and helicopters. The stock is up by over 70% this year, with a market capitalization above the 3-lakh crore mark. The company’s net profit jumped over 50% in the quarter ended March 31, 2024, and revenue was up by 18% year-on-year. The stock is seen trading in overbought territory.

3. Indian Railway Catering & Tourism Corporation (IRCTC)

The share price of IRCTC is up by 26% this year. The stock is expected to announce its earnings on May 28, 2024, with the board expected to recommend a dividend as well. The stock is seen trading in overbought territory.

Conclusion

Considering these PSE stocks are trading in overbought territory, the question looms: is it time to book profits? Profit booking should not be done solely based on the RSI values. A more comprehensive analysis considering other factors is recommended.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.