This Tata Stock Surged ‘20% in 3 Days’; What’s Behind the Buying Spree?

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From the last 3 sessions, a Tata Group company was under the spotlight for its massive rally. The stock under consideration is Tata Chemicals (NS: TTCH ) which is in the business of manufacturing soda ash and sodium bicarbonate to cater to various industries such as food, textiles, animal feed, glass, pharmaceuticals, etc. 

The company has a market capitalization of INR 27,236 crores and its share price has surged by a massive 20.5% in the last 3 sessions (including today) to the last traded price of INR 1,154, by 11:44 AM IST. The volume in these sessions totaled around 23.2 million shares. To put it in perspective, the average 10-day volume of the stock was less than 1 million shares per day on 8 August 2022, which has soared over 3 times in three sessions to 3.2 million shares. So what is triggering this buying frenzy in Tata Chemicals?

The primary trigger for the rally is the company’s Q1 FY23 results. It reported QoQ consolidated revenue growth of 12.71% to INR 4,070 crores. However, the eye candy for investors was improved efficiency of the operations which resulted in a profit surge by 34.47% to INR 589 crores in the same period. It is the highest quarterly profit of the company since the March 2020 quarter.

The last financial year for the company proved to be a stellar one, leading to a consolidated net profit of INR 1,257.62 crores over a mere INR 256.37 crores in FY21, reflecting a multi-fold profit growth of around 390.5%, despite a mere 23.5% jump in the net revenue during the same period. 

As per the latest filings, FIIs have also increased their stake in the company. As of June 2022, FIIs interest jumped to 14.99%, from 13.02% as of June 2021. Over the period of 1 year, mutual funds have also shown increasing interest in Tata Chemicals, raking up their stake from 6.46% as of June 2021 to 7.58% as of June 2022. The confidence of retail investors is also improving looking at the increasing trend of participation of these big institutions.

Image Description: Daily chart of Tata Chemicals with Fibonacci retracement levels and RSI at the bottom 

Image Source: Investing.com 

Now the bigger question is how far the stock could surge from the current levels. Without a doubt, the stock is extremely overbought right now with the RSI (daily, 14) showing a reading of over 88, which is the highest reading since December 2020. Clearly, participating in the rally at the current levels might prove to be a risky idea. Also, there is a runaway gap being left open on the chart amid Wednesday’s gap-up opening. 

The nearest level to where the stock might retrace in case profit booking takes place at these sky-high levels, is around INR 1,051. However, even this support seems to be a bit on the higher side, therefore a 50% retracement of the rally from July 2022 till date, which comes to around INR 965 could be an ideal level for the patient investors. Coincidently, this is the exact level where the stock would also be closing its gap.

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  • Ria Singh @Ria Singh
    thanks
    Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      You're welcome Ria.
      Like 0
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  • Sudipto Roy @Sudipto Roy
    Tata Chem is also an indirect EV play
    Like 0
  • Manu Chakradhar @Manu Chakradhar
    tata stall wt target
    Like 0

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