Technical Check: About 20% in a week! This smallcap company is a perfect buy on dip stock; fresh highs likely in 2022

Eveready Industries Ltd has rallied over 46 percent over the past 12 months versus a 15 percent upside seen in the Nifty50. The rally in Eveready Industries is not over yet. Investors who plan to put fresh money can look at buying the stock on dips for a possible target of Rs 475-600 in 2022. The view is based on technical indicators according to experts.

Eveready Industries, a small cap company, with a market capitalization of more than Rs 2500 cr hit a 52-week high of 413 on 6 October and post that the trend went sideways.

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But the recent price action suggests that bulls have taken control of the stock. It rallied nearly 20 per cent in a week, and over 13 per cent in 1 month, compared to a nearly 2 per cent fall in Nifty in a week, and about 3 per cent decline seen in a month, Trendlyne data showed.

The stock has been an outperformer in the smallcap space, and if there is mild profit booking after a steep rally, investors should consider buying the dip.

Eveready is the undisputed market leader in the batteries segment, commanding over 50% of India's market share, and holding 75% of India's organised flashlights market.

Although December quarter results highlighted over 50 per cent year-on-year (YoY) fall in the net profit of the company to Rs 23 cr. The battery category saw an unprecedented cost-push exceeding 20 per cent in the quarter necessitating increase of prices to the market, resulting in market resistance, said a PTI report.

Despite muted results, foreign investors raised their stake in the company in Q3 while the stake of fund managers remained unchanged.

FIIs increased their holding from 2.21 per cent in the September quarter to 2.47 per cent in the December quarter, data from Trendlyne showed.

The stock price started its upward move from Rs 45 (March 2020) to Rs 413 (October 21), making series of higher bottoms & higher tops. During the move, the stock continuously traded above averages.

“The stock saw slight profit booking followed and the stock corrected to 255 in January 2022. From October 2021 to Jan 2022 most of the time the stock traded within averages,” Bharat Gala, President - Technical Research, Ventura Securities Ltd, said.

“A Weekly Bullish Candle, supported by volumes has been formed. The stock has made a high of 366 surpassing the previous 3-months highs. From Oct 2021 to Jan 2022 most of the time the stock traded within averages,” he said.

‘The KST, Demand Index & ROC Indicators have generated a Primary buy signal. The possible targets are 475-600,” recommends Gala.

“If the stock price corrects downwards the buy levels are (340-323)-311-(298-290). Stop Loss to be observed in the trade is 265,” he added.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)