India’s own ‘meme’ stock comes alive after long hiatus; analysts gung ho

NEW DELHI: India’s own ‘meme’ stock, , has climbed in six of last eight sessions, making traders wonder whether the scrip will finally come out of its painful range after exhibiting extreme rangebound movements for a long time now.

Rangebound trading on the cigarette maker has made it a popular theme for ‘meme’ lovers across social media platforms.

On Monday, the stock rose 0.09 per cent to close at Rs 212.55 in the back of Friday’s 4.45 per cent gain. Technical charts suggest the stock may soon come out of range and test the Rs 250 level.

Aditya Agarwala, Senior Technical Analyst at YES Securities, said the stock has been oscillating in a broad rising channel since the March 2020 crash.

After turning southward from the upper end of the channel at Rs 240, it recently traded sideways at Rs 199-200 on the downside and Rs 220-225 on the upside.

“The stock is approaching the upper end of its trading range. A breakout from this range may take it back to the upper end of the channel i.e. Rs 246-250, which is also the 200-weekly moving average,” he said.

Sameet Chavan, Chief Analyst for Technical and Derivatives at Angel Broking, said ITC has been one of the most loved stocks among investors as well as traders, but it has failed miserably to live up to expectations.

He said that the price action on the counter since November 2020 till early part of February this year was excellent, but there has been a complete lull ever since.

“After experiencing some correction from the recent highs, the stock went into the consolidation mode and spent some time around its cluster of key moving averages. On Friday, we saw an unexpected surge in prices along with sizable volumes. That raised hope that it would continue the momentum. We recommend going long on any minor dip towards Rs 209-Rs 207 for a target of Rs 222 in the coming days. A strict stop loss can be placed at Rs 202,” he said.

Vaishali Parekh of Prabhudas Lilladher believes the stock bottomed out near the significant 20-DMA level of Rs 198 and is picking up momentum. Following Friday’s move, the scrip has moved past the 50-EMA at Rs 207, aiding the positive bias, she said.

“The RSI also has indicated a trend reversal to show strength and give a buy signal. With the charts looking attractive, we suggest buying the stock for an upside target of Rs 230-238 keeping a stop loss at Rs 200,” she said.

Subash Gangadharan, Senior Technical and Derivative Analyst, HDFC securities, said the technical indicators are sending out positive signals, as the stock is trading above the 20-day and 50-day SMAs.

“Momentum indicators like the 14-day RSI are in rising mode, and are not overbought, which implies further upside potential,” he said.

“With the technical setup looking attractive on the longer time frame charts, we expect the stock to gradually move higher in the coming weeks,” Gangadharan said.

He recommended buying it in the Rs 210-215 range with a stop loss placed at Rs 206 for a target of Rs 227.

The cigarette maker is yet to report its March quarter earnings.

Edelweiss expects the company to report 2 per cent profit growth and 11 per cent Ebitda expansion on 13.4 per cent year-on-year revenue growth.

“On a base of 10 per cent degrowth in cigarette volume, we expect it to grow 5 per cent YoY. The FMCG business should continue to do well to ensure 15% YoY revenue growth on a base of 2.8 per cent degrowth,” the brokerage said.

Centrum broking expects the FMCG major to report an overall 5.3 per cent revenue growth.

“Our on-ground channel checks suggest ITC’s cigarette segment is expected to grow 9 per cent in value and 2 per cent volumes YoY, considering the base effect wherein volume suffered 7 per cent in March 2020. We estimate the FMCG segment to continue the growth momentum with 10 per cent growth, while the hotels segment growth may decline 60 per cent YoY. With higher agri output (rabi season), we expect the agri business to grow 12 per cent YoY. Net profit may decline 7 per cent owing to an increase in tax rate this quarter over the base quarter,” the brokerage said.