Mukesh Ambani’s investment Alok Industries (NSE: ALOKINDS) reached the upper circuit on March 6. The reason behind this move was Alok’s ₹ 7,000 crores investments that it raised from RIL.
The textile company, having a presence in the domestic as well as international market can now be seen trading at ₹29 per share. Earlier in January, Alok made a new short term high of 39 closing above its previous resistance.
However, later, the stock declined by nearly 30% in the last two months reaching a lowest point of ₹27.15.
Alok industries was in a bearish trend for the past few years, which changed in the year 2023. After making a low of ₹10.10 in February 2023, the stock has progressively gained over 287%.
About Alok Industries
Established in 1986, Alok specialise in cotton yarn manufacturing and garments products. The company has a huge network present in Maharashtra and Gujarat along with other states.
The company has a complete manufacturing chain, where fibres are turned into fabric. They have a huge capacity of over 30 lakh spindles.
Apart from India, they also operate their business in various countries like Europe and America.
Why is Alok Industries’ price rising?
Alok has risen more than twice from its 52 week low indicating strong positive momentum. Foreign Institutional investors have also increased their stakes in this textile company.
Indian institutional investors are also very bullish towards Alok as they have also increased their stakes in the company.
Major reason behind Alok’s rise is reliance investment in the company. The company is looking to expand their business and clear its debt burden from this investment. A total of 7,000 has been planned by Alok to raise from banks and RIL.
Is Alok good for the long term ?
Financially, Alok industries are lacking in a lot of parts. The company’s net sales have been declining steadily since 2021. This loss making company’s return on equity has also been a disappointment for its investors.
Last three years profit growth for Alok is at -189% which is why the company hasn’t been able to perform substantially.
With negative book value and poor EBITDA margins of -4%, the textile company has seen a lot of bad days in the past.
Swing Trading in Alok Industries
Since the last 20 days, shares of Alok have been trading in a range of 3 points (low of 27 to high of 30). This consolidation phase is also at an important level of 27.55 which is 61.8% Fibonacci level. The level of 61.8% usually acts as a strong support when stocks are retracting.
Levels of ₹28 is also a strong demand zone, as previously buyers had actively pushed the stock to short term high from these levels last time. Taking all these reasons into consideration, a swing trade in alok can be initiated at ₹29, with stop loss at ₹27.20 targeting highs of ₹33.
This Swing trade aims to capture potential moves of 15% that the stock may experience on the basis of news and technicals.
Final Words
Alok Industries poor financial health was one major reason behind its downfall. But the company is now striving hard to improve its balance sheet and turn profitable.
It will be interesting to see how the company performs in the coming time for any significant uptrend. Trend has finally reversed for the company, but whether it will sustain or not will depend on its financial condition.
