Bajaj Auto Rs 4,000 Crore Buyback: Technical Analysis And Outlook On This Bajaj Group-Backed Auto Stock

2-wheeler and three-wheeler major player, Bajaj Auto has witnessed a volatile trend this week. After gaining by 6% due to its buyback announcement of Rs 4,000 crore, this Bajaj Group-backed stock price corrected sharply on Wednesday. Expert believes that the buyback price of Rs 10,000 is unconventional in the market, while in its technical analysis, investors are recommended to be cautious about the stock price. The reason will be that Bajaj Auto had enjoyed many months of strong rallies, and experts said it has formed a bearish divergence.

On BSE, at the time of writing, Bajaj Auto's share price traded at Rs 7,041.50 apiece, down by 0.7% with a market cap of over Rs 1.99 lakh crore. The stock has tumbled by over 1% to hit an intraday low of Rs 7,020 apiece.

On the previous day, this Bajaj stock zoomed by nearly 6% to as high as Rs 7,399 level before ending at Rs 7,093.75 apiece, up by over 1.5%.

In a year, Bajaj Auto stock has climbed by nearly 97% on the BSE.

On January 8, Bajaj Auto's board approved a buyback of up to 40 million shares having a face value of Rs 10 each. The buyback size is Rs 4,000 crore. The board of directors fixed the share buyback floor price at Rs 10,000 per share, which is at a premium of 43.15% from its current market price.

Bajaj's board may, till one working day before the record date, increase the Buyback price and decrease the number of Equity Shares proposed to be bought back, such that there is no change in the Buyback Size.

This will be the second buyback to be carried by Bajaj Auto in less than two years. The last buyback that Bajaj Auto launched was of Rs 2,500 crore between July 4th to October 10th of 2022. The floor price of this buyback was at Rs 4,600 per share.

Here's what should investors do in Bajaj Auto stock price.

Jigar Patel, Senior Manager - of Equity Research at Anand Rathi said, " In the last 1 year or so, the said counter has been in a solid uptrend, but recently on a daily scale, stochastics has formed a bear divergence, so one needs to be cautious. We might see some corrections at 6800 levels."

Giving a fundamental view, Dhruv Mudaraddi, Research Analyst, StoxBox said, "Bajaj Auto witnessed a healthy uptick in retail during the festive season and sustained demand even after the festive season, given it has been largely focussing on the 125+ cc segment and demand has been continuing to be better in the above 125 cc segment in comparison to the entry-level segment. This has led the company to repurchase shares at a premium of 43%, setting the buyback price at Rs 10,000 per share market which is quite unconventional in the capital markets."

Mudaraddi added, 'This corporate action was responded to positively by the investors which propelled shares of the renowned motorcycle manufacturer. With the automaker aiming to play at multiple price points and surplus in its internal accruals due to robust growth in the bottom line, we believe that the company is rewarding its investors by way of buyback. Going forward, we have an optimistic outlook for exports in the fourth quarter of this fiscal year."

From April to December 2023 of FY24, Bajaj Auto recorded total sales of 32,82,357 units, rising by 7% from sales of 30,68,129 units in the corresponding period of the previous year. 2-wheeler sales stood at 28,11,106 units, up by 3% YoY, while commercial vehicles outperformed with sales of 4,71,251 units registering a growth of 34% YoY.

Disclaimer:

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