6th May 2020 was an interesting day for Aditya Birla Fashion Retail Limited (ABFRL).
The stock opened at ₹ 106 in the morning, crashed to ₹ 97 at around 1PM and suddenly rose to a high of ₹ 113 – before finally closing at ₹ 111 per share.
The day was extremely volatile for the stock. It really goes to show the difficulty in buying or selling shares in this kind of market.
A stock could fall 10% immediately after you buy it or rise 10% immediately after you sell it. Vice versa, obviously, is possible too.
The stock market has always been volatile, especially the small and mid-cap stocks, but the last 2 months have seen extremes.
While some Pharma and FMCG companies are hitting all-time highs, other stocks from Banking and Auto sector hitting multi-year lows.
Several Pharma companies are expected to benefit out of the health scare, while FMCG companies that sell basic essentials are expected to show good earnings.
The Banking sector could suffer because people who have taken loans may not pay and several companies could shut down and not pay pending loans.
During recession and economic uncertainty, people are extremely cautious on spending – car and two-wheeler sales are expected to remain low.
This brings us to the stock we are discussing in this article – Aditya Birla Fashion.
The company manufactures and retails branded and non-branded clothes and apparels – across retail outlets in India.
A couple of months ago the stock was performing well as the company had announced excellent financial results.
Just when the stock was hitting all-time highs – came the news that COVID19 could potentially halt business.
Most of the business for ABFRL comes from its retail Pantaloons stores at shopping malls across the country – unfortunately there doesn’t seem to be much certainty around when malls will eventually open.
The result has been a 60% fall in the price of the stock in just 2 months – which is significantly more than the 40% fall of its competitor Trent (West Side) which is quoting much higher valuations currently.
Now that the stock has crashed, is it time to seriously look at ABFRL as a stock to buy or accumulate at this point?
The company has debt, the parent group too isn’t doing well. But the valuations are low. It’s at these times that good stocks have to be bought for long-term.
Eventually, malls are expected to reopen – sooner rather than later. Humanity is expected to survive and eventually thrive – like it always has.
ABFRL has some of the biggest and well-known clothing brands.
Check it out: