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Stock Mantra: This consumer goods company is poised for near 30% rally

According to a technical analyst, the charm of Godrej Consumer Products is back and its shares are in a long-term breakout

August 25, 2021 / 11:08 AM IST
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Shares of Godrej Consumer Products, the maker of Good Knight mosquito repellents and Cinthol soaps with a presence in over 90 countries, have rallied more than 36 percent so far in 2021 compared with an 18 percent gain in the Nifty 50 and the BSE 100 Index.

The stock, with a market capitalisation of more than Rs 1 lakh crore, is poised to advance to Rs 1,300 in the next 3-4 months, experts said. A rally of more than 24 percent in the past three months helped the stock to break out from the 2018 swing high placed at about Rs 970 in August.

A swing high is a technical indicator that signals a price peak followed by a decline.

The stock hit a 52-week high of Rs 1,063 on the BSE on August 23. If the momentum continues, Godrej Consumer could hit Rs 1,320, which would be a 28 percent gain from the August 23 close of Rs 1,029.15.

GODREJCP MONTHLY CHART

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Between 2008 and 2018, the Godrej Consumer stock generated returns of over 45x. However, after the high attained in 2018, the price entered a correction phase.

“This correction however got arrested last year… and from there we have seen steady up move with increasing volumes. On the daily chart, prices are continuously moving in a higher-top-higher-bottom price cycle and dips are getting easily bought,” said Rajesh Bhosale, a technical analyst with Angel Broking. “Now the prices have broken above the 2018 swing high to confirm a long-term breakout and it seems the charm of this counter is back with prices entering uncharted territory.”

The fast-moving consumer goods space, which was out of action for more than a year, started picking up momentum in August and in the current phase, it would be appropriate to place bets on the defensive FMCG space.

Bhosale added that with a top-down approach, he recommends buying the stock at current levels and on dips towards Rs 960 for a target of Rs 1,320. The stop-loss is at Rs 910.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Kshitij Anand is the Editor Markets at Moneycontrol.

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