Wheels India Surges To A 52-Week High — Analyst Explains Why

Shares of Wheels India Ltd. are surging in trade on Wednesday, reaching a 52-week high of Rs 911. This comes on the back of a favourable outlook on auto and auto ancillary sectors, following the recent GST cuts implemented by the government, says technical analyst Kush Bohra.

Bohra added that there is strong near-term momentum in the stock, especially after the rally on Wednesday.

"Today’s breakout is attributed to a significant increase in trading volumes, strong accumulation over the past week, and a crossover of the 20 daily moving average (DMA) moving above the 50 DMA. This development confirms the near-term momentum for the stock," he said.

Shares of Wheels India are currently trading at Rs 862, which amounts to a surge of 6% from Tuesday's closing price of Rs 809.

The stock has gained more than 27% on a year-to-date basis, though the majority of the gains have come in the last six months.

Kush Bohra, founder of Kushbohra.com, explains that while Wheels India, which is involved in the business of road wheels and parts of the accessory used by construction and mining industries, is not a direct beneficiary of the GST cuts announced by the government earlier this month, it has gained from the favourable outlook within the auto ancillary space.

"Wheels India has recently benefited from the favourable outlook in the Auto and Auto Ancillary sectors, driven by the recent GST reductions," he said.

"Initially, the stock experienced a surge following the GST cut announcement on August 15, but it quickly underwent profit booking. It then consolidated within the 730-740 range, near the 20 DMA, which coincides with the 38.2% retracement level of the rally that commenced in early March," he added.

Wheels India is currently trading at a relative strength index of 64, which suggests neutral market sentiment.