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Under bear attack, top Nifty gainer of 2024 is down 28% this year; buy, sell or hold? - BusinessToday

Trent Shares Plunge Amid Bear Attack: From 2024 Nifty Star to Market Turbulence – Buy, Sell, or Hold?

In a dramatic turn of events on the Indian stock market, shares of Trent Limited, the retail arm of the Tata Group, experienced a sharp decline, crashing by over 10% in a single trading session. This plunge has sent shockwaves through investors, especially considering Trent's stellar performance throughout 2024, where it emerged as one of the top gainers on the Nifty index. The sudden bear attack has raised questions about the sustainability of its growth trajectory, prompting analysts and market watchers to debate whether this is a temporary setback or the beginning of a deeper correction. As the dust settles, investors are left pondering the age-old dilemma: should they buy on the dip, sell to cut losses, or hold steady amid the volatility?

To understand the context, it's essential to revisit Trent's remarkable journey in 2024. The company, which operates popular retail brands like Westside, Zudio, and Star Bazaar, capitalized on India's burgeoning consumer market. With a focus on affordable fashion and groceries, Trent rode the wave of post-pandemic recovery, urban expansion, and rising disposable incomes. Its stock price surged by more than 150% over the year, outpacing many peers in the retail and consumer sectors. This made it a darling of the Nifty 50, contributing significantly to the index's overall gains. Factors such as strategic store expansions, efficient supply chain management, and a shift towards e-commerce integration fueled this ascent. Analysts had praised Trent for its resilient business model, which seemed immune to inflationary pressures and economic slowdowns that plagued other sectors.

However, the recent bear attack appears to stem from a confluence of factors that have eroded investor confidence. Market reports indicate that profit-booking by institutional investors played a pivotal role. After such an extraordinary run-up, many funds decided to lock in gains, leading to a cascade of selling pressure. Additionally, broader market sentiments have turned cautious due to global economic uncertainties, including rising interest rates in the US and geopolitical tensions affecting commodity prices. In India, concerns over moderating consumer spending amid high inflation and potential monsoon disruptions have added to the woes. Trent, being heavily reliant on discretionary spending, is particularly vulnerable to these headwinds. A recent quarterly earnings report, while showing revenue growth, highlighted margin pressures from increased operational costs and competitive pricing wars with rivals like Reliance Retail and Avenue Supermarts (DMart).

The crash was exacerbated by technical factors. Trent's stock had been trading at elevated valuations, with a price-to-earnings (P/E) ratio hovering around 100-120 times, far above the sector average. This overvaluation made it a prime target for short-sellers and bearish traders. On the day of the plunge, trading volumes spiked dramatically, with millions of shares changing hands, indicating heavy institutional selling. The Nifty index itself dipped marginally, but Trent's outsized fall dragged down the consumer discretionary segment. Social media buzz and analyst notes amplified the panic, with some dubbing it a "correction long overdue" after the 2024 bull run.

Diving deeper into the reasons behind this bear attack, it's worth examining the competitive landscape. Trent has been aggressive in expanding its Zudio format, which targets budget-conscious shoppers with fast-fashion items. This has yielded impressive same-store sales growth, but competitors are catching up. Reliance's entry into value retail and DMart's dominance in groceries pose stiff challenges. Moreover, supply chain disruptions from global events, such as the Red Sea crisis affecting imports, have increased costs for apparel and merchandise. Analysts point out that Trent's debt levels, while manageable, could become a concern if growth slows. A report from a leading brokerage highlighted that while Trent's revenue grew by 50% year-on-year in the last quarter, net profit margins squeezed to under 5%, raising red flags about profitability sustainability.

Market experts have mixed views on the fallout. Some see this as a healthy correction that could present buying opportunities. For instance, a prominent fund manager argued that Trent's fundamentals remain strong, with a projected compound annual growth rate (CAGR) of 25-30% over the next three years, driven by store additions and digital initiatives. They emphasize the company's backing by the Tata Group, which provides financial stability and synergies across sectors like hospitality and e-commerce. On the flip side, bearish analysts warn of further downside, citing over-optimism in valuations and potential economic slowdowns. They predict that if consumer sentiment weakens due to factors like job market uncertainties or fuel price hikes, Trent could face prolonged pressure.

From a technical analysis perspective, the stock's chart shows a classic breakdown below key support levels. The 50-day moving average was breached decisively, signaling potential for more declines towards the 200-day average. Relative Strength Index (RSI) readings dipped into oversold territory, which might attract bargain hunters, but momentum indicators suggest caution. Options data reveals increased put buying, indicating hedging against further falls. In the broader Nifty context, Trent's weightage means its performance influences index funds and ETFs, potentially leading to correlated movements in related stocks.

Investor sentiment is divided, as reflected in online forums and trading apps. Retail investors, who piled into Trent during its 2024 rally, are now facing paper losses and contemplating exits. Institutional investors, however, might view this as a dip to accumulate, given the long-term growth story in India's retail sector. The Indian retail market is projected to reach $2 trillion by 2030, with organized retail like Trent poised to capture a larger share from unorganized players. Initiatives like the government's push for digital payments and infrastructure development further bolster the case for recovery.

So, what should investors do: buy, sell, or hold? For long-term believers, buying on this dip could be rewarding. Trent's expansion plans, including adding hundreds of new stores annually, and its foray into beauty and personal care segments, signal robust growth potential. Valuations, post-correction, might realign to more reasonable levels, making it attractive. However, risk-averse investors might consider selling if they anticipate prolonged market volatility or if their portfolio is overweight in retail stocks. Holding is perhaps the most prudent for those with a medium-term horizon, allowing time for earnings to validate the growth narrative. Experts recommend monitoring upcoming quarterly results and macroeconomic indicators like GDP growth and inflation data.

In conclusion, Trent's crash amid this bear attack underscores the volatility inherent in high-growth stocks. From being the Nifty's shining star in 2024 to facing intense selling pressure, the company's story is a reminder of market cycles. While short-term pain is evident, the underlying business strengths – brand loyalty, expansion strategy, and market tailwinds – suggest resilience. Investors must weigh their risk appetite against these factors. As the market evolves, Trent could either rebound strongly or face further tests, but its position in India's consumption boom remains compelling. Whether this is a buying opportunity or a warning sign depends on one's perspective, but one thing is clear: the retail giant's journey is far from over.

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Read the Full Business Today Article at:
[ https://www.businesstoday.in/markets/stocks/story/trent-shares-crash-bear-attack-nifty-gainer-of-2024-buy-sell-or-hold-486263-2025-07-25 ]