Should you buy stocks of housing finance companies at the current levels?

Trading strategies for key housing finance stocks such as HDFC, PNB Housing Finance, Can Fin Homes, Indiabulls Housing Finance and LIC Housing Finance

The recent downgrade of Dewan Housing Finance Corporation (DHFL) due to a default in interest payment to debenute-holders triggered a fall of over 20 per cent in the counter. The price decline was seen with aggravated volumes. This time around, however, a higher volume with negative close indicates more downside ahead.



That said, the company is confident of honouring its repayment obligations by the close of the seventh working day (June 13). Of the Rs 961.95 crore due on Tuesday (June 11) towards non-convertible debentures, the company has already paid Rs 276.05 crore of its obligations in interest and principal, reports suggest. READ MORE ABOUT IT HERE 

So, given these developments, are stocks of hosuing finance companies (HFCs) a good bet at the current levels?

Housing Development Finance Corporation (HDFC): The weekly chart suggests a trend line resistance in the range of Rs 2,210 – Rs 2,250 levels. There is no doubt that the stock is rising consistently upward with a strong positive sentiment. However, the next upward move is likely only after absorbing the selling pressure in the said range. A close below Rs 2,150 would mean more downside towards Rs 2,080 and Rs 2,020 levels. The RSI (Relative Strength Index) has slipped from overbought territory with a negative crossover, which indicates weakness in a trend.  CLICK HERE FOR DETAILED CHART VIEW
 
Can Fin Homes (CANFINHOMES): This is one of the stocks that have seen a steep rise, soaring 30 per cent in March 2019. The overall trend on the daily chart shows more upside in coming sessions, as a “Golden Cross” formation boosts the positive sentiment. Both the major moving averages 50-days moving average (DMA) and 100-DMA have made positive crossovers with 200 DMA. The range of Rs 335 – Rs 328 should act as near-term buying level, with support from 100 DMA at Rs 305. The bullish trend should head towards Rs 385 and 410 levels. CLICK HERE FOR DETAILED CHART VIEW
 
Indiabulls Housing Finance (IBULHSGFIN): The price pattern denotes an upward rising trend. However, the stock falls short on volumes as per the daily chart. It did make positive crossovers of significant moving averages. That said, a rise in volumes on buy-side is inadequate rather it is deteriorating. One can see buying reversal around Rs 570 levels. As and when stock attempted to hold above its 200 DMA, it has struggled and selling pressure visible. CLICK HERE FOR DETAILED CHART VIEW
 
PNB Housing Finance (PNBHOUSING): A falling channel breakdown has dented the sentiment. Although, it is making efforts to climb towards the upper falling trend line, the counter still lags in overcoming the selling pressure. A rally looks tough as volumes are not supportive of an upward move. One needs to wait for this stock to build a strong support base that can absorb any further correction. A major breakdown may happen below Rs 775, chart suggests. CLICK HERE FOR DETAILED CHART VIEW
 
LIC Housing Finance (LICHSGFIN): The stock started witnessing profit booking as RSI tops out in the overbought levels. A mild correction should be seen as opportunity to buy till the overall trend stays positive. The chart formation depicts “Higher top, Higher Bottom”, which inherits a positive trend till a fresh lower levels are not met. Rs 520 stay as support, which also is its 50 DMA. The trend suggests tha the stock is moving towards Rs 583 - a level after which the counter witnessed a gap-down close in August 2018. CLICK HERE FOR DETAILED CHART VIEW