Asian Paints shares in overbought zone, is the upside capped?

Shares of Asian Paints are down 28% from their 52-week high in a less than a year. Of late, the stock has faced turbulence with new entrants triggering disruptive pricing in the sector. New players such as Pidilite (Haisha Paints), Grasim (Birla Opus), and JSW Paints have expanded their presence in the market, challenging the position of the market leader, which controls over half of the domestic market. 

On the financial front too, the performance of Asian Paints is not impressive. 

The firm reported a 45% fall in net profit to Rs 692 crore for the quarter ended March 2025. Consolidated revenue also slipped by 4.3 percent to Rs 8,359 crore.

In its investor presentation, the firm said competition to remain intense; and it would put strong focus on the core - strengthening the brand saliency. 

"The weak demand conditions prevalent for the past few quarters continued to affect the paint industry even in the last quarter of the financial year," said Amit Syngle, Managing Director & CEO.

In the current session, Asian Paints shares were trading on a flat note at Rs 2428.45. It hit an intraday high of Rs 2464 on BSE. Market cap of the firm stood at Rs 2.33 lakh crore. 

The stock has lost 17% in a year and fallen 27.54% in two years. The paints stock is down 12% in three years.  The stock is overbought on charts with a RSI of 70.5. 
 
Drumil Vithlani, Technical Research Analyst at Bonanza Portfolio said, "Asian Paints is exhibiting a classic double bottom formation on the weekly timeframe—a pattern typically considered a strong bullish reversal indicator. The stock has also posted a sharp 2.1% gain in the latest week and is now approaching the neckline resistance around Rs 2470. 

Moreover, the ADX indicator is trending higher, suggesting that momentum is building in favour of the bulls. A sustained move above Rs 2470 could trigger the next leg of the rally, with potential upside targets at Rs 2550 and Rs 2600 in the near term. On the flip side, traders should keep a stop loss below Rs 2327 to manage risk."

Vatsal Bhuva, Technical Analyst at LKP Securities said, "As per the bullish mean reversion setup, the stock is expected to test its 200-day EMA near the Rs 2,465 zone after surpassing its 100-day EMA." 

Systematix Institutional Equities has a price target of Rs 2,645 on the stock. Te brokerage believes the company is well-placed to benefit from a gradual industry demand recovery, benign raw material costs and operating efficiencies, supported by product differentiation. 

"We lower our FY26E-FY27E revenue/EPS estimates by 6-7%/10% to account for a near-term reset of growth/margins at lower levels; we build in FY25-FY27E revenue/EPS CAGR of 7%/11% respectively. We maintain BUY rating on Asian Paints; we roll forward valuation to March-2027 (from December-2026), valuing the stock at a P/E of 51x (in-line with its current one-year forward multiple), resulting in a TP of Rs 2,645 (vs Rs 2,870 earlier)," the brokerage said. 

Kotak Equities has a reduce call with a price target of Rs 2250. It finds the outlook of the stock weak and valuation of the stock too high to take a positive stance. 

"We cut FY2026-27E EPS by 3-6%, roll over and maintain FV at Rs 2,250, valuing Asian Paints at 43 times June 2027E PE (unchanged). While the earnings downgrade cycle may be nearing its end, the outlook remains markedly weak, and valuations are still too rich to justify a constructive stance," said Kotak Equities.