Today’s market rally has not just increased the confidence of investors but also bumped up their risk appetite to place some high-risk bets on microcaps. One lesser-known stock that has come on my radar is Gayatri Projects Limited. It is an infrastructure company that executes civil works across roads, Industrial and power projects and has a market capitalization of less than INR 200 crores.
The stock had been plunging from higher levels for a long while now. The stock marked a 52-week high of INR 52.95 in October last year and since then has only been seeing a downward momentum. The selling spree going on in this counter had been so strong that no level since then seemed to cap the plunge and every counter rally on the way down had been sold off. Investors only kept on exiting the stock at every possible level and hence the stock tanked to a 52-week low of INR 8.15 yesterday. This depicts a massive capital erosion of around 85% from the 52-week high.
Image Description: Daily chart of Gayatri Projects with volume bars at the bottom
Image Source: Investing.com
Without a doubt, the fall also made the stock highly oversold as what was depicted by the RSI (14, daily). The RSI plunged to a level of 25.21 on Monday which clearly fulfills the criterion of a lower reading than 30 for the oversold condition.
However, today, the stock bolstered to the highest level in the last 4 sessions, on a single day, as it rallied 20% to hit the circuit limit of INR 9.8. The massive surge in the price was also backed by a volume of 12.55 million shares which is over 70% higher than the 10-day average volume of 7.23 million shares. The volume action behind the price rally, strong enough to hit a 20% upper circuit limit are indicating a probable trend reversal from here. Today’s rally has also been accounted for by the RSI which has generated a reading of over 40.63, indicating a classic buy signal by the indicator.
Today’s price action looks like there was a climax that happened in the last trading session which was probably the last phase of the fall. Now as the stock has started to move on the upside, the nearest level to which it can rally in a jiffy is around INR 14, which depicts a 30% move from the CMP. However, if the current rally actually proves to be a lasting trend reversal, then it won’t be surprising if the stock doubles from here (at least) in the foreseeable future. It is a penny stock therefore it is probably not suitable for every type of trader as they are the epitome of volatility.
Disclaimer – Any security mentioned above shall not be deemed as a recommendation to buy/sell/hold the same.