DMart (Avenue Supermarts Ltd.) has experienced its worst monthly drop since its 2017 listing, with shares falling by 22% in October 2024. The stock is currently trading below ₹4,000, a critical support level, raising questions about its future performance.
Investors are wondering: is this an opportunity to buy the dip, or should they brace for more downside?
Key Reasons Behind DMart’s Sharp Decline
- Weak Quarterly Performance: DMart’s Q2 FY25 earnings revealed sluggish growth compared to previous quarters. The company posted a 14.4% YoY revenue growth in Q2, which is below the 18-20% growth typically seen in earlier quarters.
- Rising Competition: The rise of quick commerce players like Zepto, Blinkit, and Instamart, coupled with increased competition from organized retail chains like Reliance and Star Bazaar, has significantly impacted DMart’s store performance, particularly in metro cities.
- Tepid Growth Metrics: Key growth metrics such as sales per store, bills per store, and sales per square foot showed only marginal improvements in Q2, signaling a slowdown in consumer spending and DMart’s ability to capture market share.
DMart’s Q2 FY25 Financial Metrics
| Metric | Q2 FY25 Performance |
|---|---|
| Revenue Growth (YoY) | 14.4% |
| Profit After Tax (PAT) | ₹659 crore (5.8% YoY) |
| Sales per Store Growth | 1.2% YoY |
| New Stores Added | 6 stores |
These modest gains indicate a slowdown in DMart’s growth trajectory, leaving investors concerned about the company’s near-term outlook.
Is There More Pain Ahead for DMart?
Market analysts are divided on DMart’s future. The stock is currently trading 32.5% below its peak of ₹5,899, and technical analysts warn of further downside.
Key Resistance and Support Levels:
| Price Level | Significance |
|---|---|
| ₹4,000 | Psychological support level |
| ₹3,900 | 200-week moving average |
| ₹3,700-₹3,750 | Strong support zone |
Some experts believe that if DMart breaks below ₹3,900, the stock could fall further to ₹3,700, where it is expected to find stronger support.
Should You Buy, Hold, or Sell DMart?
- Rajesh Bhosale, Angel One: “The stock is at a critical support level of ₹3,900. A break below this could signal more downside, but investors may consider staggered buying at this price point.”
- Dr. Ravi Singh, Religare Broking: “DMart is under pressure due to weak performance metrics and rising competition. However, the ₹3,700 level provides strong support, making it an attractive buy for long-term investors.”
Conclusion: Is DMart a Buy?
Given DMart’s sluggish performance and increased competition, analysts suggest caution for short-term traders. However, long-term investors might find value in accumulating shares at lower levels, especially around the ₹3,700-₹3,900 support zone.
Disclaimer
Stock market investments are subject to risks. Investors should perform due diligence or consult financial experts before making investment decisions.