Tata Chemicals witnessed a remarkable surge in its share price, soaring by around 8 percent during morning trading on March 7, reaching a 52-week high of Rs 1,271.15. This surge marked the sixth consecutive session of gains for the company’s stock.
The bullish momentum in Tata Chemicals’ shares commenced on March 1 after Fitch Ratings affirmed its Long Term Foreign Currency Issuer Default Rating (IDR) at BB+ and revised the outlook to “stable” from “positive.”
As of 9:49 am, Tata Chemicals was trading 7.6 percent higher at Rs 1,269 on the National Stock Exchange (NSE). Over the past five sessions, the stock has rallied an impressive 33 percent, reflecting the growing investor interest in the company. In the last year, Tata Chemicals’ shares have gained 25 percent, mirroring the gains in the benchmark Nifty index.
While the rapid ascent in the stock price has heightened its appeal, analysts caution against initiating fresh long positions at current levels. Jigar S Patel of Anand Rathi Shares & Stock Brokers advised exercising caution due to significant resistance expected around Rs 1,200-1,205, primarily based on historical highs depicted in chart analysis.
Patel recommended a prudent approach for investors, suggesting consideration of profit booking and adopting a wait-and-see stance, anticipating a potential correction in the stock’s price before considering further investment actions.
For the quarter ended December 2023, Tata Chemicals reported a 60 percent year-on-year drop in net profit at Rs 158 crore amid tepid demand across key regions and segments. The company’s revenue also declined by more than 10 percent to Rs 3,730 crore during the same period.
Despite near-term industry pressures, Fitch Ratings expects Tata Chemicals’ Ebitda (earnings before interest, taxes, depreciation, and amortization) net leverage to average 2.2x over FY25-FY27, driving the “stable” outlook. Fitch Ratings anticipates margin improvement to 17 percent from FY26, supported by gradual demand recovery, supply tightening, and lower energy costs. However, prolonged unfavorable economic conditions and industry supply glut could limit margin improvement, the ratings agency noted.