Mumbai: Lloyds Engineering Works Ltd, formerly known as Lloyds Steels Industries Ltd, witnessed a significant drop in its share price on Monday, shedding 9.30% after reaching its one-year high level during intraday trading. The stock, which had touched a new 52-week high of Rs 59.81 earlier in the day, closed at Rs 50.45, down from its previous close of Rs 55.62. The sudden decline, attributed to profit booking, has drawn attention to the stock’s potential for volatility and prompted discussions among analysts about its future trajectory.
In 2023, the multibagger Lloyds Engineering stock has displayed impressive growth, skyrocketing by 185.03%. Additionally, over the past year, the stock has surged by an astounding 224.44%. Despite this recent setback, the stock’s overall performance over the past year and its exceptional gains this year have kept investor sentiment optimistic.
However, analysts have expressed concerns over the stock’s technical indicators, which suggest it might be ‘overbought.’ Both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have placed Lloyds Engineering’s securities under the long-term Additional Surveillance Measure (ASM) framework. These frameworks serve as cautionary measures to inform investors about the possibility of high volatility in share prices.
Vaishali Parekh, Vice-President of Technical Research at Prabhudas Lilladher, commented on the recent price action, stating, “The stock has witnessed a decent rally in the last 2 months. It saw profit booking today. The near-term support would be Rs 48.50 zone and next upside target would be Rs 63.”
Osho Krishan, Senior Analyst of Technical & Derivative Research at Angel One, noted that Lloyds Steels has demonstrated positive performance throughout the financial year, maintaining a position above all major Exponential Moving Averages (EMAs) on daily charts. Krishan also pointed out the stock’s recent significant price spurt, which led it to achieve new highs. He emphasized that the stock has entered the overbought region and might require a period of consolidation. In terms of price levels, Krishan identified the bullish gap around the Rs 50 mark as a likely immediate support zone, followed by additional support levels around Rs 44-40.
Jigar S Patel, Senior Manager – Technical Research Analyst at Anand Rathi Shares and Stock Brokers, offered a cautious perspective, noting that the stock has already generated a remarkable return of 129% within a month and a half. He further cautioned that the stock’s current trading significantly above major EMAs could make it susceptible to mean reversion, advising against initiating fresh long positions.
AR Ramachandran from Tips2trades echoed the sentiment that Lloyds Steels is overbought according to the daily charts. Ramachandran’s prediction for the stock in the near term is a slip to Rs 45.50.
The stock’s 14-day Relative Strength Index (RSI) currently stands at 71.76, suggesting a relatively high level of momentum. The company’s stock boasts a price-to-earnings (P/E) ratio of 162.96, contrasting with a price-to-book (P/B) value of 30.73. Moreover, the stock has displayed low volatility with a one-year beta of 1.33.
As the stock market continues to be a dynamic environment, Lloyds Engineering’s recent dip serves as a reminder of the inherent volatility in the sector. While the stock’s impressive gains this year are noteworthy, its recent decline underscores the importance of informed decision-making and thorough market analysis.