Titan Company – a multibagger of yesteryears and top holding of ace investor Rakesh Jhujhunwala – is in a rut. The stock fell about 9 percent last week, extending its losses to 30 percent from its 52-week high levels.
The jewelry and watchmaker has been a casualty of the market-wide selloff and a belief that people will curb discretionary spending as inflation continues to shoot higher making even basic commodities out of reach for many Indians.
On Friday, the stock fell over 6 percent to hit Rs 1,935 level. Though it is still a 14 percent drop away from the 52-week low levels. Its 52-week high level was at Rs 2,767.55 that it hot in March.
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So, does it mean one should start accumulating the shares at this level? The answer from technical analysts is largely no, as they believe there is still some downside left in the stock.
Rupak De, Senior Technical Analyst at LKP Securities, said the correction in the recent months has led the stock to fall below the 200 DMA for the first time since August 2020. On the daily chart, it has been correcting with the ‘lower top lower bottom’ formation, indicating a prevailing bearishness.
Earlier in June, the stock has formed a Death Cross – a phenomenon when a 50-day moving average (DMA) line falls below 200-DMA on daily charts – which is a strong bearish signal. Such a movement in trendlines indicates a medium-term weakness in the stock trend.
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“Coming back to the price action, the price, after consolidation has extended its fall towards lower level. Moreover, lower top in the daily RSI indicates a rising bearish momentum. Henceforth, the stock may remain in the bears’ grip as long as it remains below the recent low of Rs 2,050. On the lower end, the price may drift down towards Rs 1,750/1,510 over the short to medium term,” De said.
“Looking at the current setup, one can apply the “sell on rise” strategy in the stock. The stock may attract selling pressure once it reaches to the Rs 2,050-2,100 level. However, a close above Rs 2,260 may induce short covering in the stock,” he said.
Shares of Titan are also affected by how gold prices move and wedding season. Gold prices have come down by 8-10 percent from March levels and are currently trading near Rs 50,000 level, despite it being a hedge against inflation. It means inflation is generally supportive of gold prices. The drop in prices is due to marriage season being almost over.
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Tirthankar Das, Head of Technical Research, Ashika Group, also agrees that the main trend is downwards according to the daily swing chart. The downtrend was reaffirmed once sellers took out the psychological level of Rs 2,000.
“Prices now trading below the 200-DMA and the 38.2 percent retracement of the entire rally since March 2020, signalling further downsides. The slower pace of retracement also suggests inherent weakness and the presence of bearish ‘Head & Shoulder’ formation implies negative bias,” Das said. “Immediate support for the stock appears from 100-week EMA at Rs 1900-1915. Hence outlook continues to remain neutral to negative with a lower target of 1740-1750.”
Fundamental analysts though have a slightly different view. Most analysts have maintained their bullish outlook on the stock and believe the fall may be just a short-term blip.
Abhay Agarwal, Founder, and Fund Manager, Piper Serica – a PMS provider – said, while some of this correction can be explained as part of the overall market correction, the stock is also under pressure due to its premium valuation.
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“Titan has always traded at a significant premium to the rest of the market due to its industry leadership. However, in the current market scenario, all premium valuations are under big threat. A slowdown in consumption due to high inflation and interest rates will reduce the growth of the company,” he said.
“High FPI ownership and persistent rumours of stake sale by a large shareholder have also created investor nervousness. We stay positive on the prospects of the company and advise investors to use further dips to add it to their portfolio in a systematic manner.”
