Bata has rallied nearly 70% from its October lows and stock remains resilient in the market and has been posting strong quarterly numbers. In the recent years, premiumisation has been a big strategy where new ideas , novelty items and new articles was brought into the shelves and offering a higher value proposition to its consumers which helped the company charge a little bit more for its products, this has directly translated into better quarterly numbers for the bottom-line. The company has also expanded into the Bags segment. In the past three years the company has a net addition of 135 stores.
The company is taking advantage of the increasing shift towards branded products in Indian and has capitalized on the ecommerce boom by selling in its own website and partner websites like Flipkart/Amazon etc which have already reached 5-10% of its turnover. Bata has a target of 500 franchise stores over the next 4-5 years in tier 2 and tier 3 cities and would plans to launch 75-100 new company-operated stores per year. This will help expand the geographical footprint for Bata and create sustainable growth engine for the company going forward.
Bata India regained the fall from the highs of 1100 and then conquered the same within four months. The stock has corrected decently every time the price came to the resisting trend line. The stock broke the trend line in Feb-19 and a big bull candle emerged from there. The close above an important trend line is an indication of loads of strength .The RSI has been oscillating between 80 and 40 on the monthly charts and that is very positive. It shows that the trend is very strong. Fibonacci extensions show that the stock will now face resistance at 1498-1548. This is the confluence zone and hence a strong resistance for the counter. The RSI is now entering the bull zone of 80 and a close above that on a monthly basis will be an indication that the stock is in a strong bull trend and the correction in this counter should be utilized to buy. The immediate resistance now lies at 1497-1548 which is some 10% from the current levels of 1410.