Asian Paints stock check: This D-Street darling is now being overlooked. What should be your move? | Stock Market News

Shares of Asian Paints, once the cynosure of value investors, are now being overlooked. The stock ended 2024 with a substantial loss of 33 per cent. Over the past three years, it has declined by 32 per cent, even as the equity benchmark Nifty 50 gained 37 per cent.

Multiple headwinds have contributed to the stock’s poor performance. Volatility in crude oil prices, heavy monsoon rains, weak demand, and increased competition intensity shrank the company’s margin, keeping the stock under pressure. Moreover, the paint sector is also witnessing a shift in cost structure and market share.

Investors hoping for a quick rebound in the stock may be disappointed. Most fundamental and technical experts remain cautious about its short-term prospects, although some anticipate a revival in the next financial year (FY26).

What should investors do?

The stock could be a buy for those who have a long-term (over two to three years) investment horizon. However, at this juncture, most experts suggest avoiding the stock.

Sneha Poddar, VP – Research, Wealth Management at Motilal Oswal Financial Services, pointed out that Asian Paints has massively underperformed but is not likely to offer respite in the near term.

“The near-term demand outlook looks bleak given the weak demand and curtailed festive period due to extended monsoon and early Diwali. The rising competition will also exert pressure on earnings,” said Poddar.

Poddar believes the company’s operating margin may weaken further as it needs to reinvest in the business to counter competition.

“With the entry of new players with deep pockets and massive commitments to investments, the overall industry may see a shift in market share and cost structures. Thus, industry volume recovery and competitive pricing and incentives strategies will be key monitorable for the stock,” said Poddar.

Technical indicators exhibit weakness

Technical experts also have pessimistic views about the stock.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, observed that the monthly chart of Asian Paints has turned bearish, breaking its three-year low, signalling weakness. The three-year volume profile indicates significant activity in the ₹3,200-3,400 zone, highlighting this area as a distribution phase where bearish divergence was also evident.

“Currently, the RSI on the monthly chart has fallen below 40, indicating further weakness heading into 2025. The Virgin Point of Control (VPOC) at ₹1,675, an untested price level per market profile, is expected to act as strong support. Fresh long positions should be avoided until the stock sustains above ₹1,700 for one to two months in 2025. Investors are advised to exit on any bounce toward the ₹2,500-2,600 zone, with caution prevailing in the near term,” said Patel.

Shitij Gandhi, Senior Research Analyst (Technical) at SMC Global, underscored that the stock has been trading within a broader range of ₹2,600-3,500 over the past three years, and recently, it has experienced a fresh breakdown following prolonged consolidation.

Gandhi observed that this breakdown, occurring below the ₹2,600 mark, has been accompanied by rising volumes, signalling long unwinding and further selling pressure.

“Despite hitting its 52-week low, we believe the downside risk remains, as the bears are firmly in control of price movements. The next key support level is seen at ₹2,000, while any technical bounce will likely face strong resistance in the ₹2,500-2,600 zone,” said Gandhi.

“We advise traders to exercise caution in the medium term and refrain from attempting to catch the falling knife until the stock establishes a solid support level,” Gandhi said.

According to Mandar Bhojane, an equity research analyst at Choice Broking, Asian Paints stock has broken below a symmetrical triangle pattern on the weekly chart. This bearish breakdown indicates sustained selling pressure, with immediate support at ₹2,200. A breach of this level could accelerate the downward movement, targeting ₹2,100 and ₹2,050.

On the other hand, ₹2,400 remains a critical resistance level, and only a sustained close above this level would signal a potential reversal in the current bearish trend, said Bhojane.

“The Relative Strength Index (RSI) stands at 22.65, reflecting extreme oversold conditions and underlying weakness. The Stochastic RSI has witnessed a bearish crossover, confirming the continuation of downward momentum. These readings suggest that the stock will likely remain under pressure in the near term unless there is a significant shift in market sentiment or buying interest,” Bhojane said.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.