After a seven-day decline, Kalyan Jewellers Ltd. share price has recently seen a significant uptrend, reflecting a significant correction. The stock closed at ₹787.75 on January 2, 2025, but by January 13, it had fallen sharply to ₹572.65, reflecting a decline of about 27.30%. The stock recovered 4.95% to close at ₹601 on January 14. This article examines the factors that contributed to this correction and whether the upward trend can be sustained.
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Factors Behind the Recent Decline
Several factors can be explained to the sharp fall in the share price of Kalyan Jewellers:
- Market Sentiment: The generally negative mood of the market has impacted many equities, including Kalyan Jewellers. In an investor call on January 14, the company's management addressed concerns over the falling stock price and emphasised that their impressive performance is not in line with market sentiments at this point.
- Inventory Losses: The business reported inventory losses that occurred mostly during the second quarter of the financial year. Such losses can lead to stock sell-offs, which can have a major impact on investor confidence.
- Profit Taking: Investors may have participated in profit-taking after a 385 percent increase in the stock price during the last two years, which may have contributed to the current decline.
Recovery Indicators
The stock is trading in the oversold zone, according to Kalyan Jewellers' Relative Strength Index (RSI), which is now at 23. Given that traders often look for buying opportunities in oversold conditions, this could be a sign of a potential bounce. In the third quarter of FY25, Kalyan Jewellers reported a phenomenal 39% year-on-year growth in sales, with same-store sales growing over 24%.
Such impressive performance indicators are likely to result in investors returning to the stock. In the fourth quarter of FY25, the business intends to open 30 new Kalyan and 15 Candere outlets in India. They plan to open 170 new showrooms for both brands in FY26. This aggressive expansion plan is anticipated to support revenue growth in the future.
Analyst Perspectives
Based on consistent franchise-led growth and balance sheet deleveraging, Citi Research has set a price target of ₹810 for the company and continues to suggest a "buy" investment. They feel these elements will help boost growth and enhance returns on invested money.
Independent analyst AR Ramachandran advises investors to think of buying if the stock closes above ₹610, as this could lead to a short-term target of ₹706 shortly. Choice Broking derivative analyst Hardik Matalia advises against opening a trade until a definite reversal signal is received. He points out that if Kalyan Jewellers sustains above ₹600, then a favourable trend shift towards ₹680-700 could be confirmed.
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Source - Business Today, Economic Times