Honasa Consumer Share Price Hits Upper Circuit: Know Why It’s Rallying

Honasa Consumer’s share price has been under significant pressure, plummeting nearly 40% in the past month and over 50% in the last three months. This decline pushed the stock below its IPO price of Rs 324 earlier in November.

The downward trajectory started on November 18, following disappointing quarterly results. The company reported a consolidated net loss of Rs 18.5 crore for the September quarter, a stark contrast to the Rs 29.4 crore profit recorded in the same quarter the previous year.

Allegations and Clarifications

Adding to the stock’s woes were allegations by the All India Consumer Products Distributors Federation. The body accused the company of engaging in “unethical stock dumping practices,” which raised concerns among investors.

On November 23, Honasa Consumer addressed these allegations, terming them “misinformation.” The company clarified that as of October 31, its distribution network carried an inventory worth Rs 40.69 crore. It also announced significant changes in its distribution strategy, including the elimination of the two-layered super-stockist model in the top 50 cities. This move aims to streamline operations and improve supply chain efficiency through a single-layered distributor structure.

Technical Indicators and Volume Spike

Despite the recent rally, Honasa Consumer’s share price remains below key moving averages (20-DMA, 50-DMA, and 200-DMA). The stock recently experienced a “death crossover,” where the 50-DMA crossed below the 200-DMA, typically considered a bearish signal.

Interestingly, the November 28 session saw the highest trade volumes in the last four days, indicating renewed interest among market participants.

What’s Driving the Recent Rally?

The upper circuit surge appears to be driven by:

1. Clarifications from the Company: The company’s response to the allegations and its strategic changes may have restored some investor confidence.
2. Oversold Conditions: After a steep decline, the stock may have attracted bargain hunters, leading to a sharp recovery.
3. High Trading Volumes: The spike in volumes suggests active buying interest, possibly from institutional players or retail investors seeking to capitalize on the low price.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.