DMart shares hit 52-week high, overbought on charts; buy, sell or hold?

Shares of DMart (listed as Avenue Supermarts) have gained 46% from their 52-week low hit last year. The stock of the operator of DMart fell to a 52-week low of Rs 3353.05 on May 18, 2023. It scaled a fresh 52 week high of Rs 4888 today, gaining 45.77% from its yearly low. With today’s rally, the stock has entered overbought zone, signals its relative strength index (RSI) of 76.3.

DMart shares rose 2.75% to a high of Rs 4888 on BSE on Tuesday. Market cap of the firm rose to Rs 3.11 lakh crore.

The retail sector stock clocked a turnover of Rs 2.69 crore after 5581 shares of the firm changed hands on Tuesday. The stock has a one-year beta of 0.2, indicating low volatility during the period. In terms of technicals, Avenue Supermarts shares are trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages.

Gaurav Bissa, VP, InCred Equities said, "DMart was seen trading in a consolidation for a while, however it recently witnessed a strong breakout from a bullish triangle pattern on the weekly charts with incremental volumes which catapulted the price toward Rs 4800. The recent correction in broader market resulted in some profit booking in Dmart which retested the swing high breakout level at Rs 4600. Since then, it has witnessed a smart bounce and looks poised for a move towards Rs 5200 levels."

Commenting on the technical outlook of the stock, Aditya Gaggar, Director of Progressive Shares said, “An Ascending Triangle formation breakout was spotted in the stock, which was confirmed with a trendline breakout in RSI and an upsurge in volume as well. Trend following indicator MACD confirms price activity by giving a positive crossover, ADX further confirms the move with a reading of 35 which indicates the presence of a strong trend. We had already initiated a technical report on the stock on December 1, 2023 at Rs 3,950 with a decline up to Rs 3,860 for the target price of Rs 4,885 (achieved) and Rs 5,820.”

CLSA has a price target of Rs 5,107. It assigned a buy call to DMart shares. CLSA highlighted an addressable market exceeding Rs 50,000 crore, with less than 5 percent organised. CLSA said that private labels could drive the next phase of share gains.

Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher expects the stock to rally up to Rs 5,200- Rs 5,400 levels.

 "DMart  has given a symmetrical triangle pattern breakout on the daily chart with good volume moving above the resistance zone of Rs 4,200 levels after a strong consolidation in the last 2 years in the range of 800 points and is now trading above the cluster of moving averages levels of Rs 3800, which is strong support for the short term.  The RSI indicator has also confirmed the buy signal with a trend reversal, and we anticipate this stock to rally up to Rs 5,200- Rs 5,400 levels,” said Koothupalakkal.