Tata Chemicals soars 8% to 52-week high

In past five sessions, Tata Chemicals has rallied 33 percent but analysts have cautioned against initiating fresh long positions

Tata Chemicals shares zoomed around 8 percent in morning deals on March 7 to hit a 52-week high of Rs 1,271.15, extending gains to the sixth consecutive session.

The stock has been rallying since March 1 after the company said that Fitch Ratings affirmed its Long Term Foreign Currency Issuer Default Rating (IDR) at BB+.

The ratings agency has also revised the outlook to “stable” from “positive”.

At 9:49 am, Tata Chemicals was trading 7.6 percent higher at Rs 1,269 on the National Stock Exchange (NSE).

In past five sessions, the stock has rallied 33 percent. In the past year, Tata Chemicals' has gained 25 percent, in line with the gains in the benchmark Nifty.

The rapid gains in the stock price has enhanced the appeal of the stock, drawing attention from investors, analysts said.

It is imperative to exercise caution due to the significant resistance looming around Rs 1,200-1,205, primarily identified through the presence of a previous historical high depicted in the chart analysis, said Jigar S Patel of Anand Rathi Shares & Stock Brokers.

"Therefore, initiating fresh long positions at this juncture is not advisable. For individuals who have already entered the market, it is prudent to consider booking profits and adopting a wait-and-see approach, anticipating a meaningful correction in the stock's price before contemplating further investment actions," Patel said.

For the quarter ended December 2023, Tata Chemicals reported a 60 percent on-year drop in net profit at Rs 158 crore amid tepid demand across key regions and segments. The Tata Group chemical firm's revenue fell more than 10 percent to Rs 3,730 crore.

Tata Chemicals is the world's third-largest soda ash producer. Fitch Ratings expect the company's Ebitda (earnings before interest, taxes, depreciation, and amortisation) net leverage to average 2.2x over FY25-FY27 and be commensurate for its rating, driving the “stable” outlook despite the near-term industry pressures.

The margins will improve to 17 percent from FY26, supported by a gradual demand recovery, supply tightening, and lower energy cost. However, a prolonged period of unfavourable economic conditions and supply glut in the industry could limit margin improvement, Fitch Ratings said.

Source: Money Control