Long Term Investment: Bombay Rayon Fashions Ltd. IDBI Capital
Bombay Rayon Fashions Ltd. (BRFL) is one of the leading, vertically integrated textile companies in India. They are having a strong presence across the entire value chain of design, yarn dyeing, weaving, fabric processing, garment manufacturing and retail. The company is engaged in the manufacture and sale of a variety of fabrics, garments and home textiles. A flagship company of the Bombay Rayon Group, it was incorporated on May 21, 1992, became a public limited company on Oct. 13, 1992, and got its current name on Sep. 30, 2004.
This textile counter was off to a flying start since its listing on the bourses during December 2005. On the long term charts prices were maintaining a series of higher bottoms, holding support of a nice primary rising trendline (orange line). From the low of 80 in Dec 05, prices covered excellent distance to reach a high of 418 by May 08.
Topping out there prices slipped into its usual round of correction, moved down to hold support near the same rising trendline and bounced back once again July 08 onwards. However this time around, with the market being in a highly negative mode, prices failed to register new highs. Instead, forming a lower top due to selling on ral- lies, prices collapsed yet again Sept 08. The fall from that high of 392 was so razor sharp that prices never thought twice before slicing past the strong primary trendline and moved to test the prior low of 80. With the level giving good support, prices finally bottomed out from the prior run and staged a fresh rally in March 09. The equally sharp rise led prices to swiftly pullback about 50% of the earlier decline but the retracement at 236, of the falling swing Sept 08-March 09 capped the gains and pushed prices into a fresh fall in June 09.
From the chart below we see that a quick pick up from the lows the following month led prices to rally up well but they were never able to get past the 50% retracement region of 236. Prices fell into a symmetrical triangle pattern formation. The black line on the charts is the lower end of the formation where prices are seen maintaining a neat higher bottom series. RSI in the last many months has been moving between 40-60 region, waiting for a nice opportunity to burst out. This will happen only with a firm breakout in prices from 236 levels. With the setup on both price and momentum looking good and indicating possibilities of a breakout, we advise buying above 236-40 for rally towards 322-25 where a double resistance lies and past that at around 400-05.
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Category: Long Term
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