Technical Check: This large-cap underperformer from paint space could see an upside of 30% in 6 months; here’s why

Asian Paints Ltd rallied by about 24 per cent in the last 1 year compared to the 26 per cent upside seen in the Nifty50 in the same period, but the recent breakout seen on technical indicators suggests bullish momentum in the near term, suggest experts.

The large-cap paint company with a market capitalization of about Rs 3.3 lakh crore hit a 52-week high of Rs 3,504 recorded on 24th September but failed to keep the momentum going.

The stock fell by over 18 per cent from the high to hit a low of Rs 2,857 on 25th October before reversing losses. The stock, which rallied over 10 per cent in the last 1 month, recorded a breakout from the consolidation range in December.

Various technical indicators signal an upmove towards Rs 3,700-4,400 that translates into an upside of 30 per cent from Rs 3,381 recorded on 31 December, suggest experts.

Asian Paints is the largest paint company in India with a market leadership of over 50 years and stands among the top 10 paint companies in the world. The company has 26 paint manufacturing plants in 15 countries, serving customers in over 60 countries globally.

The rising middle-income group, fast urbanisation, shift from the unorganised to organised space, and improving penetration in rural markets are some of the key revenue drivers for paint companies in the near to medium term, said a Sharekhan report.

APL, with a leadership position in the decorative paint business and a strong brand portfolio, will continue to deliver good earnings growth in the near term.

Asian Paints (and decorative paints industry) has undertaken two rounds of price increase post the festive season, with (1) 9-10% blended price increase from Nov 12, 2021, and (2) 4-5% additional price increase from Dec 5, 2021, Kotak Institutional Equities said in a note.

The stock price moved from 1432 (March 202) followed by higher bottoms taking the stock to a high of 3504 (Sept 21)

“Continuously, the stock took the support of averages & entered consolidation phase between Sept21 to Dec21. The total move from March 2020 had more percentage of Positive Days,” Bharat Gala, President - Technical Research, Ventura Securities Ltd, said.

“Recently, the stock gave breakouts & made a high of 3404 above the previous 11 Weeks high. Aroon Up/Down, KST  & ROC  Indicator suggest a possible up move. The possible targets are 3700-4400,” he said.

Gala further added that if the stock price corrects downwards the buy levels are (3310-3255)-3210--(3165-3140). Stop Loss to be observed in the trade is 3015.

(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.)