Shree Rama Multi-Tech star in the Packaging Industry Rallied more than 45%

In the last trading session of the week, the Nifty index surpassed the psychological resistance level of 19,000 and experienced a significant rally. Amidst this bullish trend, one stock from the capital goods sector, specifically the packaging industry, caught the attention of investors by hitting the upper circuit.

The stock in focus is Shree Rama Multi-Tech Ltd, a micro-cap company and a leading provider of packaging solutions with a wide customer base in both local and foreign markets. The company distributes its products through an established network, offering a range that includes multilayer tubes, monolayer tubes, cups, labels, multilayer film, plastic laminate applications, and injection moulded articles. Founded in 1987 and headquartered in Gandhinagar, India, the company has established itself as a prominent player in the industry.

With a market capitalization of approximately 205 crores, Shree Rama Multi-Tech Ltd has demonstrated a sales growth of 10% CAGR, a return on equity of 13% CAGR, and a strong profit growth of 32% CAGR over the last five years.

From a technical standpoint, the stock has been retracing its last rally that began in the second last week of October 2019, starting from the Rs 2.40 level and reaching the Rs 20.60 level in the first week of January 2022. Following this significant rally, the stock started retracing, experiencing a decline of approximately 78.2% through lower highs and lower lows in the range of Rs 20.60 and Rs 7.20. During this trading action, a swing high of Rs 16 level was formed in the first week of September 2022. 

By drawing a trendline from the first week of January 2022 high (Rs 20.6 level) to the first week of September 2022 high (Rs 16 level), we can observe a falling trendline on the weekly chart. Interestingly, the stock has crossed this trendline today and is poised to close above it. A close above Rs 13 will confirm the breakout of this falling trendline.

Considering the breakout level of Rs 13, the minimum potential target for this breakout stands around Rs 20, representing a gain of approximately 30% from the current market price of Rs 15.40. 

As a result, swing traders and short-term microcap investors may want to add Shree Rama Multi-Tech Ltd to their watchlist as it demonstrates favourable prospects in the current market conditions.