Contra bets in HCL Tech and Wipro could give up to 20% gains; Here's why

If Wipro fails to defend the 200-WMA placed at Rs 378, the stock can slide to near Rs 300-mark. On the other hand, HCL Technologies seems to be on course to test Rs 1,200.

Shares of HCL Technologies and Wipro on Thursday witnessed a diverse trend, after the IT companies announced contrary Q2 earnings and revenue guidance. HCL Tech opened gap-up and surge to a 13-week high, while Wipro slipped to a fresh 52-week low on robust volumes. 

HCL Tech beat Street estimates with a 7 per cent rise in consolidated profit and firmly raised the revenue forecast for FY23. The short-term and medium-term growth prospects remain optimistic for HCl Tech. READ MORE

Whereas, Wipro failed to cheer investors as their profit dipped in the second quarter. The company registered 9.6 per cent decline in its net profit attributed to employee expenses and sluggish growth in non-US markets. It's future outlook too was below Street estmiates. READ MORE

Having said that, here's why one can take contra bets in these two IT stocks:-

HCL Technologies Limited (HCLTECH)

Likely target: Rs 1,050 and Rs 1,200

Upside potential: 5% to 20%

Post hitting the historic peak at Rs 1,329.90 in January this year, HCL Tech shares lost the upside grip tumbling to their fresh 52-week low of Rs 867.70 in July 2022. This drop led to the formation of the “Death Cross”, symbolizing selling pressure on every subsequent rise. 

At present, the stock has a major barrier at Rs 1,000-mark, the immediate hurdle that needs to be taken out to rally ahead. As and when that occurs, the bulls shall aim at Rs 1,050 mark, which is their 200- day moving average (DMA).

The counter does reflect stability over Rs 952 and Rs 940, which are its 100-DMA and 50-DMA, suggestive of a positive bias that could cross Rs 1,000-mark and eventually the 200-DMA.

In general, stocks trading above the 200-DMA catches investors interest, as they firmly believe such stocks do well in the medium-term. So, if HCL Tech conquers the 200-DMA (Rs 1,050), it could lead to a shift in sentiment from bearishness to bullishness and the stock may rally to Rs 1,200 mark. CLICK HERE FOR THE CHART

Wipro Ltd (WIPRO)

Outlook: Last hope for bulls at Rs 378

On Thursday, Wipro’s share hit a fresh 52-week low exhibiting weakness and aggravating selling pressure. From a medium-term perspective, Rs 440 persists to hold a major barrier here onwards. 

Fresh lows on the chart given the upper hand to the bears, and indicates likely more decline, which might turn into a “bear–run” if the counter fails to defend Rs 378 level its 200-weekly moving average (WMA), and the last hope for bulls. Breaking of the 200-WMA wall could see the stock slipping to Rs 320 and Rs 300 odd levels and recovery hopes seem to become null. CLICK HERE FOR THE CHART