Bajaj Finance: Should You Buy Now or Wait for Further Fall?
As of May 5, 2021, BAJAJFINSV (Bajaj Finance) is trading at its 52-week low near 1865. This has raised questions among investors regarding the right time to buy. In this article, we will analyze the current technical and fundamental situation of Bajaj Finance to provide guidance on whether now is the right time to initiate a position or if you should wait for further price action.
Technical Analysis
On May 5, 2021, the BAJAJFINSV 27-MAY 2021 futures opened with a 1.3 percent gain and traded with positive sentiment throughout the day. On the daily chart, BAJAJFINSV is forming a flag pattern, and a breakout above 11300 is anticipated. According to the pattern, potential targets of 11500-11600 can be expected in the upcoming trading sessions. The MACD has also given a positive crossover, suggesting a bullish scenario.
Should You Buy Now?
Technically speaking, yes, there are reasons to consider initiating a long position. The stock has been tested at support levels multiple times over the past two months, and it is likely to rebound if it breaks out of this support.
However, it is important to note a second reason: the business model of Bajaj Finance is heavily reliant on credit loans. Due to the Covid-19 pandemic, bad loans have surged, leading to an increase in NPAs (Non-Performing Assets). The quarterly financial performance for the business in the coming months is expected to be worse than before. Therefore, it is advisable to watch the market and wait for a more stable period before making a decision.
Operational and Financial Analysis
From a technical standpoint, the stock is aiming towards the downside, with a high number of sellers present. This suggests that the stock could potentially go down to 1700 levels. In situations of lockdown, experts recommend buying shares of companies that are solely dependent on their share price, but it's crucial to remember that the market dynamics can be vastly different.
Market Overvaluation
Till 4700, the stock was overvalued, especially during a time when the economy was performing well. Currently, the economic conditions have changed, making the valuation scenario different. Therefore, it's important to factor in both technical and fundamental indicators before making any investment decisions.
Promoter Holding and Growth
The company has a promoter holding of 56 percent, which, while adequate, is not particularly impressive. Despite sales growth and profit seen in the company, the stock's momentum has been dampened by technical indicators. Therefore, it's imperative to wait for the stock to stabilize at around 2000 levels before considering a long position.
Conclusion
The current situation of Bajaj Finance presents a complex investment scenario. While the technical indicators suggest a potential for a rebound, the fundamental weakness due to the financial impact of the pandemic and the current economic situation suggest that further market volatility is likely. As a seasoned investor, it is essential to monitor the market closely and wait for a more stable period before considering any investment in Bajaj Finance.
Keep investing wisely. Thank you!