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The mood of the Indian markets seems to be good at the start of the week, with the benchmark index rallying 0.36% to 19,380, by 11:30 AM IST. The small-cap space is also trading in the green zone and one counter that is buzzing is Campus Activewear Limited (NS:).
It is a well-known India-based footwear company with a market capitalization of INR 9,343 crore. The company’s Q1 FY24 earnings report was not that impressive as revenue increased 4.6% YoY to INR 353.97 crore while the net income almost remained the same as in the same period last year.
Image Description: Daily chart of Campus Activewear with volume bars at the bottom
Image Source: Investing.com
However, it looks like the subdued earnings have already been priced in and the stock seems to have bottomed out. No doubt, it has delivered severe pain to investors since October 2022 when it topped out at INR 639.9 and from there, it came crashing down to an all-time low of INR 282.75, earlier this month. This massive price drop has also brought down the TTM P/E ratio to 79.67 which is decently low compared to its peer Relaxo Footwears’ TTM P/E of 135.75.
As I mentioned, the stock seems to have bottomed out and the room for upside is significantly higher than the downside risk. The stock has formed a bullish divergence at the lows which is a reversal sign. A follow-up buying is also kicking in, further strengthening the reliability of this divergence.
Also, a short-term falling trendline resistance had also been breached in the previous session, which is also indicating a trend reversal. As of writing, the stock is up 2.8% to INR 313 and
all these signals are painting a bullish picture for the stock for the nearest level of INR 380. This gives a decent upside potential of 21% from the CMP.
To manage the risk, a stop loss can be placed below INR 280, preferably on a closing basis.
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