Midcap and small cap stocks are on fire and there is no stopping them. It is very common to see shares from the space rally, as much as 5 and 10 per cent every day. In fact, some of them can give returns of near 40 per cent in two-days. It will take bank deposits 4-years to give similar kind of returns. Here is a midcap stock that jumped 30% in trade in the last two days.
Shares in Gitanjali Gems was trading at Rs 73 last week on Friday. By the time trade was over on Monday, the stock hit a 52-week high of Rs 93. The stock markets were closed on Tuesday and Wednesday (today). Thus, the shares gained almost 30 per cent in two-trading sessions. Now, it is interesting to note, that the stock has jumped 300 per cent from 52-week low prices of Rs 29.95. In fact, if you had to buy the stock in early March, you would have been richer by 3 times, the money invested.
Reasons for the recent jump in the share price?
The reasons for the recent jump in the share price on Friday and then again on Monday are not known. The only notice that the exchanges were sent on Oct 1 by the company and that was pertaining to the voting that took place at the annual general body meeting of the company. If there is a price sensitive news, exchanges have to be notified first. However, what can be said with certainty is that the company had a good financial performance that was reported for the quarter ending June 30 2016, which led to a sharp spike in the share price after that.
Superb quarterly performance
Gitanjali Gems reported a doubling in net profits for the quarter ending June 30, 2016 to Rs 57 crores, after which the stock has been on a roll. Since then the trading volumes at the company have jumped and there has been no looking back. From levels of Rs 58 on Sept 12, after it declared its quarterly numbers, the stock has risen to levels of Rs 93.60. The markets have also been largely impressed by the fact that financial costs have fallen, which means interest rates have reduced over a period of time.
Where would the share price go from here?
It is always difficult to predict such things, but, there are a few things that are worth mentioning. The company is a DTC sight holder, which is a big positive. What this means is that Gitanjali is among the companies that can purchase from De Beers in bulk rough diamonds.
Gitanjali owns brands like Gili, Nakshatra, Sangini, Asmi and a host of others. So, on these counts the company is pretty strong. However, the high level of debts on the books remains a matter of concern for the company.
The share price has had a solid run-up in the last few trading sessions and predicting price movement in high beta stocks is foolhardy.
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