Why is Vardhman Acrylics Ltd falling/rising?

Strong Daily Performance and Sector Outperformance

The stock’s rise on 12-Feb was marked by a gain of ₹1.83, or 4.83%, which notably outpaced the sector’s average performance by 5.81%. This suggests that investors are favouring Vardhman Acrylics over its peers in the Garments & Apparels segment on this particular day. Such relative strength often indicates positive sentiment or emerging confidence in the company’s near-term prospects, even in the absence of explicit news or fundamental updates.

Technical Indicators Support Uptrend

From a technical standpoint, Vardhman Acrylics’ current price is trading above its 5-day, 20-day, 50-day, and 100-day moving averages, signalling a short to medium-term bullish momentum. However, it remains below the 200-day moving average, which may indicate that the longer-term trend is still under pressure. This technical setup often attracts traders looking for momentum plays, contributing to the stock’s upward movement.

Liquidity and Investor Participation Trends

Despite the price appreciation, investor participation appears to be waning slightly. Delivery volume on 11-Feb was recorded at 13.6 thousand shares, which is down by 11.82% compared to the five-day average delivery volume. This decline in delivery volume suggests that fewer investors are holding shares for the long term, potentially indicating cautious optimism or profit-taking by some participants. Nevertheless, the stock remains sufficiently liquid, with trading volumes supporting sizeable trade sizes without significant price disruption.

Dividend Yield Adds to Investment Appeal

Another factor likely contributing to the stock’s attractiveness is its relatively high dividend yield of 3.96% at the current price level. In a market environment where income generation is valued, a near 4% yield can be compelling for investors seeking steady returns alongside capital appreciation. This dividend yield may be reinforcing investor interest, especially among income-focused portfolios.

Longer-Term Performance Context

While the recent price action is positive, it is important to contextualise this within the stock’s longer-term performance. Over the past year, Vardhman Acrylics has declined by 13.72%, contrasting with the Sensex’s 11.98% gain. Over three and five years, the stock has underperformed significantly, with returns of -21.79% and +6.80% respectively, compared to the Sensex’s robust gains of 44.53% and 70.20%. This underperformance highlights the challenges the company has faced historically, which may temper overly optimistic expectations despite the current rally.

Investor Takeaway

In summary, Vardhman Acrylics Ltd’s rise on 12-Feb can be attributed to its strong relative performance within the sector, positive technical momentum, and an attractive dividend yield. However, the decline in delivery volumes signals some caution among investors, and the stock’s longer-term underperformance relative to the Sensex suggests that risks remain. Investors should weigh these factors carefully, considering both the recent bullish signals and the broader historical context before making investment decisions.

Limited Time Only! Subscribe for Rs. 12,999 and get 1 Year of MojoOne + an Additional Year Completely FREE. Don't miss out on this exclusive offer. Claim Your Free Year →