A smallcap stock has multiplied investors' money by more than nine times in 10 weeks and is scaling levels last seen some four years ago. Shares of Haryana-based Kohinoor Foods have breached a series of upper circuits in mere weeks, having returned to trade following an 11-month-long ban. The Haryana-based firm manufactures and markets food products — basmati rice, in particular.
Here are a few yardsticks to compare the surge with:
| Stock/index | Return (%) | |
| One month | Two months | |
| Kohinoor Foods | 188.4 | 618.1 |
| Nifty50 | -0.5 | -10.2 |
| Nifty FMCG | 0.3 | -3.1 |
| Nifty Smallcap 100 | -2.7 | -20.3 |
The rally in Kohinoor Foods shares has been so one-sided that it even prompted stock exchange BSE to seek a clarification from the company in April — a standard regulatory mechanism to protect investors' interest.
The basmati rice trader-turned-food products company responded by saying it was not aware of any significant reason behind the stock surge.
It said the movement is purely market-driven and may be due to a combination of factors, including market conditions. "The management of the company is in no way connected with the movement in the price of the shares," said the filing dated April 19.
Kohinoor reiterated that it has always adhered to regulatory compliance requirements and will continue to do so.
So what is driving the stock?
There is no apparent reason for the stock to see the kind of surge it has seen, say analysts.
In fact, the year ended March 2021 was one of the best periods for the company in the past few years, followed by another weak year.
On the bottom line, for instance, the company returned to the red in the year ended March 2022 — which makes the April-March 2021 period the only profitable year for Kohinoor Foods in seven odd years.
A similar trend can be seen on the top line.
In the year ended 2021, India was the world's second-largest producer and consumer of rice, after China, and the largest exporter. It mainly exports basmati rice to the Middle East and non-basmati rice to African countries.
Analysts say tightening global supplies have brightened the prospects of domestic rice exporters in the past few months, with a higher realisation on account of higher volumes a key catalyst.
"Since August last year, the average realisation has risen by around 15 percent. This number is expected to increase further as war tensions (Ukraine) continue to drive commodity prices higher," Edelweiss Wealth said in a research report in April.
"In a falling market, people hate uncertainty on profitability more than that on expensive valuations. They feel safer to cling on to companies with better predictability," Varun Singh, FMCG and Retail Analyst at IDBI Capital Markets, told CNBCTV18.com.
"For instance, in the FMCG sector, ITC has outperformed due to better predictability in its tobacco business, which has been relatively immune from steep inflation in other commodities," he said.
He suggests avoiding the Kohinoor Foods stock even if valuations look attractive.
Peer comparison
Technical view
Hemen Kapadia of KRChoksey Securities said it is better to avoid Kohinoor Foods shares, as "one doesn't know if and when the reverse circuits start".
"If a stock moves from nearly Rs 8 rupees to Rs 68 and that, too, only in circuits, technicals take a backseat. Support comes in at around Rs 60 and resistance at Rs 84. Needless to say, most of the mechanical indicators support the move," he said.
"Till the circuits don’t actually open up, it will be difficult to gauge the real strength of the stock and how it behaves at certain levels of strong resistance," Kapadia warned.
First Published: Jun 15, 2022 8:39 AM IST
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
AAP protest today: Delhi traffic police issues traffic advisory, security at BJP headquarters beefed up
May 19, 2024 11:26 AM
BJP is planning to ban RSS, says Shiv Sena (UBT) chief Uddhav Thackeray
May 18, 2024 8:01 PM
Punjab Lok Sabha elections: Complete list of Congress candidates
May 18, 2024 4:08 PM
Punjab Lok Sabha elections: Check full list of AAP candidates and constituencies
May 18, 2024 12:59 PM