Technical analysts indicate that the Indian Railway Finance Corporation (IRFC) might be preparing for pullback after recent correction in the stock.

What Happened: IRFC had fallen almost 28% from its highs in July. The stock has fallen after rising 116% in 2024 till July.

Foreign Institutional Investors (FII) and mutual funds had reduced their investments in IRFC in the September quarter. The company also approved financing for 20 BOBR (Bogie Open Bottom Rapid) Rakes procured under the General-Purpose Wagon Investment Scheme (GPWIS) of the Ministry of Railways to NTPC for an amount up to ₹700 crore under the Finance Lease. The development did little to stem the bleeding.

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Technical views: However, the stock has seen a minor recovery of 11% in the last sessions, which the technical analysts think has led to recovery from the oversold zone. Kushal Gandhi, technical analyst, StoxBox said, “The price is trading below the 200-day moving average and is attempting a technical pullback after being significantly oversold, particularly from a key demand zone between the 136-130 levels. The recent trading sessions signal that dormant buyers are gradually becoming active, which is a positive development.”

Gandhi added “The stock has shown improved price strength relative to the market, although it still hovers below median level readings, accompanied by a rise in buyers’ demand. Therefore, we foresee a trading opportunity with a target price of 175 and advise maintaining a stop loss at 141”.

Jigar S Patel, senior manager – technical research analyst, Anand Rathi Shares and Stock Brokers said, “Recently, IRFC has shown a bullish divergence, a technical signal suggesting a potential reversal of the recent downtrend, which has led to a significant rebound of 21 points, translating to a 16% gain over the last two days. Currently, IRFC is trading close to its 200-day Exponential Moving Average (DEMA) around the 152 level. This 200 DEMA level is crucial as it often acts as a strong indicator of long-term trend direction, and a daily close above this level would reinforce bullish sentiment, paving the way for sustained upward momentum.”

“If IRFC achieves this closing level, it could open the door for a “buy on dip” strategy, where investors take advantage of any short-term pullbacks for entry points in anticipation of continued gains. In this scenario, resistance is expected around the 160 mark, where profit-taking may occur, while support is seen near 140, which could act as a floor for any pullbacks in the near term”, Patel added.

Price Action: IRFC surged 8.84% to ₹155.35 on Wednesday.

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