Why is Guj.Nat.Resour. falling/rising?

Short-Term Price Movement and Market Behaviour

Gujarat Natural Resources Ltd’s shares have been under pressure for the past two consecutive days, resulting in a cumulative loss of 5.41% over this brief period. Interestingly, the stock opened the day with a positive gap of 2.48%, reaching an intraday high of ₹91.90, reflecting initial optimism among traders. However, the momentum could not be sustained, and the price slipped to an intraday low of ₹86.50, indicating selling pressure as the session progressed.

The weighted average price suggests that a larger volume of shares traded closer to the day’s low, signalling that sellers dominated the latter part of the trading session. This pattern often points to profit-taking or cautious positioning by investors after recent gains.

Technical Indicators and Investor Participation

From a technical standpoint, the stock remains above its 50-day, 100-day, and 200-day moving averages, which typically indicates a positive medium to long-term trend. However, it is currently trading below its 5-day and 20-day moving averages, suggesting short-term weakness and potential consolidation or correction.

Adding to the bearish sentiment, investor participation has declined. Delivery volume on 01 Dec was recorded at 1.95 lakh shares, marking a 13.93% drop compared to the five-day average delivery volume. This reduction in investor engagement often precedes or accompanies price declines, as fewer buyers are willing to hold shares, leading to increased selling pressure.

Comparative Performance Against Benchmarks

Despite the recent dip, Gujarat Natural Resources Ltd has delivered extraordinary returns over the longer term. Year-to-date, the stock has surged by 346.67%, vastly outperforming the Sensex’s 8.96% gain. Over one year, the stock’s return stands at 365.06%, compared to the Sensex’s 6.09%. Even over three and five years, the stock has outpaced the benchmark by a wide margin, with gains of 523.98% and 895.36% respectively, versus the Sensex’s 35.42% and 90.82%.

However, the short-term underperformance is evident when comparing weekly and monthly returns. Over the past week, the stock declined by 7.81%, while the Sensex rose by 0.65%. Similarly, in the last month, the stock fell 3.85%, whereas the benchmark gained 1.43%. This divergence highlights a phase of correction or profit-booking in the stock, contrasting with the broader market’s modest advances.

Liquidity and Trading Dynamics

The stock remains sufficiently liquid, with trading volumes supporting transactions up to ₹0.05 crore based on 2% of the five-day average traded value. This liquidity ensures that investors can enter or exit positions without significant price disruption, although the recent decline suggests cautious trading behaviour.

Conclusion: Short-Term Correction Amid Strong Long-Term Fundamentals

In summary, the recent decline in Gujarat Natural Resources Ltd’s share price on 02-Dec can be attributed to short-term selling pressure, reduced investor participation, and technical indicators signalling a temporary pullback. While the stock opened positively, profit-taking and a shift in trading volumes towards lower prices led to the day’s losses. Despite this, the company’s long-term performance remains robust, with returns far exceeding the benchmark indices over multiple time horizons.

Investors should weigh the current correction against the stock’s strong fundamentals and historical outperformance. The dip may present an opportunity for those with a longer investment horizon, but caution is warranted given the recent weakening in short-term momentum.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →