These 3 Nifty 50 stocks hovering near their 52-week lows; what should you do?

The breakthrough was supported by strong performances in the financial and energy sectors.

Despite the widening valuation gap, optimism persists, driven by factors such as anticipated political stability, notably with the expected triumph of the BJP in the upcoming Lok Sabha elections in May. Furthermore, there are currently no immediate market triggers that could dampen bullish sentiment.

Looking ahead, market volatility is anticipated as a result of multiple national elections taking place globally, including in some of the largest economies such as the United States, United Kingdom, India, Mexico, South Africa, Indonesia, Russia, and even the European Parliament.

Although the Nifty 50 has achieved multiple record highs, three large cap stocks—Kotak Mahindra Bank, HDFC Bank, and HUL— are hovering close to their 52-week lows.

The common factor contributing to the underperformance of these stocks is their weaker-than-expected performance in the December quarter, falling short of street estimates. These stocks have been under pressure since the release of their Q3 financial results.

Kotak Mahindra Bank: The shares have been steadily declining since the beginning of 2024. It dropped by 4.15% in January and another 3.43% so far in February. As a result, the stock is now 7.24% away from its 52-week low of ₹1,643.50, last seen in March 2023. 

In February, the bank’s decline occurred following the release of its financial report for Q3FY24. Despite a modest Profit After Tax (PAT) increase of 8% year-on-year to ₹30 billion, there was a 6% quarter-on-quarter drop.

This decline was attributed to a one-off provision of ₹19 billion for exposure to AIFs, along with a treasury loss of ₹1.7 billion. Additionally, the reported Net Interest Margin (NIM) remained unchanged quarter-on-quarter at 5.2%, supported by a rise in high-yielding assets, which counteracted the increased cost of deposits.

“The stock has underperformed and has traded in a tight range for the last more than 2 years. As of now, the prices are placed around their lower base of ₹1,700, and one can consider accumulating for a near-term bounce, keeping a stop loss below the same. Since there are no major signs of outperformance, any further bounce towards 1,820 should ideally be used to book longs,” said Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One.

HDFC Bank: In today’s trade, the stock gained by 2.63% to ₹1,454 apiece. However, the stock is trading significantly lower than its 2024 highs. 

The shares of the country’s largest private-sector bank came under pressure following the release of bank’s Q3 numbers on January 16. The downturn in HDFC Bank shares in January has sent shockwaves through the markets, precipitating a substantial decline in the Nifty 50, given its substantial weight in the index.

Between January 16 and February 14, the stock lost 17.56% of its value, and currently, it is just 6.66% away from the 52-week low of ₹1,363 apiece. 

According to Rajesh Bhosale, over the last couple of weeks, HDFC Bank shares have formed a base around the vicinity of the 200 weekly moving average. Considering the key support and oversold conditions, one can expect a bounce in the near term with the possibility of retesting 1,500 in the near term, whereas 1380–1400 act as support, he added. 

HUL: Hindustan Unilever, a leading FMCG major, faced selling pressure after its Q3 earnings release. Following a 6.85% decline in January, the stock continued to slide in February, registering a drop of 3.12% thus far. On February 15, it hit a new 52-week low of ₹2,346, and currently, it remains around this level.

“The stock has broken below its key support of 2450 and the higher degree charts have turned weak, any bounce is likely to face resistance around previous support at 2,450, whereas as of now support is at 200 weekly moving average at 2340,” said Rajesh Bhosale.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 20 Feb 2024, 04:07 PM IST