After underperforming benchmark indices in 2021 as well as on a year-on-year basis, footwear major Bata India is once again in focus thanks to the recent price action seen on technical charts. Experts suggest a rally could be in the offing which could take the stock towards its record highs of Rs 1895 on the NSE.
Bata India rose nearly 6 percent so far in 2021 compared to Nifty50's 16 percent rise, and over 19 percent gain recorded in the S&P BSE 200 index.
The footwear stock witnessed a steep fall after hitting its record high of Rs Rs 1895 back in February 2020 but took support near Rs 1000 in March 2020 and then bounced back.
Bata India hit a fresh 52-week high of Rs 1736.45 on the BSE on August 3, 2021, and is on track to retest its record highs based on technical indicators. This translates into an upside of 13 percent from the August 6 closing price of Rs 1671.
Also favouring Bata India is the recent breakout in Nifty50 which had been underperforming the broader market for the majority of 2021.
While the markets are now more likely to consolidate over the coming weeks, the broader markets and midcap may take some breather. This will make it imperative to approach the midcaps in a highly stock-specific way, said experts.
“In the present technical setup, this consumer good company, Bata India, may end up putting up a resilient show going ahead from here,” Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae, said.
When benchmarked against the broader NIFTY500 Index, Bata India has rolled inside the leading quadrant on the Relative Rotation Graph (RRG). This indicates that this stock is likely to relatively outperform the broader markets, explains Vaishnav.
“The analysis of the weekly chart of Bata India shows that the stock has relatively underperformed the general markets. While both the frontline indices and the broader indices are at their highs, this stock is away from its high point of 1895,” added Vaishnav.
He further added that few signals have emerged which hint towards the stock playing some catch-up over the coming weeks.
“The prices remain in an upward rising channel and within a broad range. In the process, it has also bounced off the 50-Week MA which currently stands at 1477; the price also appears to be taking support at the intermediate middle trend line drawn within the broad channel,” explains Vaishnav.
The weekly MACD stays in continuing buy mode, above the signal line, and bullish.
The Weekly Relative Strength Index (RSI) is neutral and does not show any divergence against the price. The RS Line against the broader NIFTY500 index has changed its trajectory and has reversed. It appears to be inching higher.
“If the present price pattern continues to resolve on the expected lines, the stock may test its previous high level of 1895 over the coming weeks, and any close below 1450 will negate this view,” recommend Vaishnav.
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