In last few trading sessions, we have seen a great buying in most of the tea stocks. They include names of warren tea, Goodricke Group, Assam company etc. Most of the tea stocks have surged nearly 25% in the past few trading sessions.
The reason for this is that there has some shortage in production of tea in Assam and west Bengal. This has resulted in a jump in tea prices as said by a management of tea company.
This case is same as we have seen earlier in power sector. There had been a news that price of electricity is seeing a significant jump. Due to this, we seen a good buying in power stocks but it last for only for few trading sessions. And in quarter ended on September, there was nothing surprising.
Going technically, then it is true that there is some breakout in most of tea stocks. And from present levels, many technical researches feels more upside in stocks. But from fundamental point of view, i don’t think that there is any clear upside in tea stocks.
This price jump in tea prices may help companies in realisation of more profit, but i don’t that this would have a significant affect on the fundamentals of company. And therefore, there are more chances that this rally is just one-time buying. Means, it could be difficult for tea stocks to sustain at their higher levels. Thus, it could be very risky for both traders and investors to take some positive call on tea stocks at present.
Therefore, to avoid large risk, i would suggest to avoid any entry in tea stocks at present. But yes, long-term investor can keep holding those tea stocks where valuations are low or reasonable, past growth records are good, and company is performing well in market.
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