Marico Faces Hurdle Near ₹741 as Charts Signal Price Fatigue
Marico Ltd., a leading Indian consumer goods company, recently announced its Q1 earnings, which were steady with flat revenue and profit, while maintaining strong margins at 21.5%. However, analysts are now flagging signs of exhaustion near the ₹741 resistance level, which could lead to a pullback in the stock’s price unless it breaks above this level decisively.
In this article, we will delve into the details of Marico’s Q1 earnings and the technical analysis that is suggesting a potential hurdle for the stock’s price.
Marico’s Q1 Earnings
Marico’s Q1 earnings, announced on July 25, 2022, were largely in line with expectations. The company reported a flat revenue growth of 0.5% year-on-year (YoY) to ₹2,113 crore, while its net profit remained steady at ₹293 crore. The company’s operating profit margin (OPM) also remained strong at 21.5%, driven by cost optimization efforts and a favorable product mix.
The company’s performance was driven by its personal care segment, which accounted for 73% of its revenue. The segment saw a 3% YoY growth in revenue, driven by strong demand for its hair care and skincare products.
Analyst Flags Price Exhaustion
After reviewing Marico’s Q1 earnings, analyst Rajneesh Sharma of ICICI Securities flagged signs of price exhaustion near the ₹741 resistance level. Sharma noted that the stock’s price has been consolidating in a range of ₹670 to ₹740 for several months, with the stock struggling to break above this level.
According to Sharma, the stock’s price fatigue is evident from the weak volume and bearish RSI (Relative Strength Index) divergence. The RSI is a popular technical indicator that measures the speed and change of price movements. A bearish RSI divergence occurs when the stock’s price is making new highs, but the RSI is failing to rise, indicating a lack of buying interest.
Sharma’s concern is that the stock may not be able to sustain its current level unless it breaks above the ₹742 level decisively. Failure to do so could lead to a pullback in the stock’s price, potentially towards the ₹670 level.
Technical Analysis
The technical analysis of Marico’s stock price is also indicating a potential hurdle near the ₹741 level. The stock’s price has been trading in a range of ₹670 to ₹740 for several months, with the stock struggling to break above this level.
The stock’s 50-day moving average (MA) is currently trading at ₹733, while its 200-day MA is at ₹694. The stock’s price is trading above its 50-day MA, indicating a short-term bullish trend. However, the stock’s price is struggling to break above its 200-day MA, which is a key level of resistance.
The RSI is currently trading at 56.5, indicating a neutral sentiment. The RSI is not overbought or oversold, suggesting that the stock’s price is neither extremely strong nor weak.
Conclusion
Marico’s Q1 earnings were steady, with flat revenue and profit growth, while maintaining strong margins. However, analyst Rajneesh Sharma has flagged signs of price exhaustion near the ₹741 resistance level. The technical analysis is also indicating a potential hurdle near this level, with weak volume and bearish RSI divergence suggesting a lack of buying interest.
Unless the stock breaks above the ₹742 level decisively, there is a risk of a pullback in the stock’s price, potentially towards the ₹670 level. Sentiment remains neutral, with the RSI indicating a lack of extreme sentiment in the stock.
For investors, it may be worth considering a cautious approach to Marico’s stock, especially if they are looking to buy in at current levels. However, for those who are already long the stock, there may be an opportunity to take profits near the ₹741 level, especially if the stock fails to break above this level decisively.
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